Republic 01 the Philippines

DEPARTMENT OF ENERGY
FEB 2 6 2010
DEPARTMENT CIRCULAR NO. 3~"31 0- 03 - 00m
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DIRECTING ALL POWER GENERATION COMPANIES, THE
TRANSMISSION SERVICE PROVIDER, AND ALL DISTRIBUTION
UTILITIES TO ENSURE ADEQUATE AND RELIABLE ELECTRIC POWER
SUPPLY IN THE COUNTRY

WHEREAS, Section 5 of Republic Act No. 7638, as amended by Section 37 of

Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001
(EPIRA), mandates the Department of Energy (DOE) to, among others, 1)
ensure the reliability, quality and supply of electric power, and 2) establish and
administer programs for the exploration, transportation, marketing,
distribution, utilization, conservation, stockpiling and storage of energy
resources of all forms, whether conventional or non-conventional;

WHEREAS, the DOE is mandated to develop policies and procedures and, as

appropriate, promote a system of energy development incentives to enable and
encourage electric power industry participants to provide adequate capacity to
meet demand including, among others, reserve requirements;

WHEREAS, the DOE is d s o mandated to monitor private sector activities

relative to energy projects in order to attain the goals of the restructuring,
privatization, and modernization of the electric power sector as provided for
under existing laws: Provided, That the Department shall endeavor to provide
for an environment conducive to free and active private sector participation and
investment in all energy activities;

WHEREAS, the DOE is further enjoined to formulate and implement

programs, including a system of providing incentives and penalties, for the
judicious and efficient use of energy in all energy-consuming sectors of the
economy;

WHEREAS, Section 6 of the EPIRA provides that the generation of electric

power is a business affected with public interest and shall be competitive and
open;

WHEREAS, as a result of the privatization of Government's power generation

assets, the generation of electricity in Luzon is now dominated by the private
sector and eventually, the same situation will occur in Visayas;

WHEREAS, a Generation Company has an obligation to meet the technical and

financial operating criteria ensuring compliance with standards for among
others, security, reliability, unplanned outages and provision of ancillary
services and shall operate in accordance with such operational criteria;
@----
Energy Center, Merrltt Rd.. Fort Bonifacio, Taguig City, Metro Manila 1201 Philippines
Tel. Nos.: Trunkline (632)840-1401; Telefax (632) 840-2067; (632) 840-2138; (632) 8404244; Fax (632) 840-1731 ; Hotline (632) 840-2230
Website: www.doe.gov.ph E-mail: info@doe.gov.ph
WHEREAS, under the EPIRA, the distribution of electricity, a business affected
with public interest, is a regulated common carrier business requiring a national
franchise, which franchise may be revoked by Congress upon recommendation
of the DOE and/or the Energy Regulatory Commission (ERC);

WHEREAS, Section 9 of the EPIRA mandated the National Transmission

Company and/or its Concessionaire, presently the National Grid Corporation
of the Philippines (NGCP) among others, to provide open and non-
discriminatory access to its transmission system to all electricity users, ensure
and maintain the reliability, adequacy, security, stability and integrity of the
nationwide electrical grid in accordance with the performance standards for
the operations and maintenance of the grid as set forth in a Philippine Grid
Code (PGC), and improve and expand its transmission facilities, consistent
with the PGC and the Transmission Development Plan (TDP) to adequately
serve generation companies, distribution utilities and suppliers requiring
transmission service and/or ancillary services through the transmission
system: Provided, That TRANSCO shall submit any plan for expansion or
improvement of its facilities for approval by the ERC;

NOW, THEREFORE, from the foregoing premises and pursuant to the

mandate of the DOE under the EPIRA, this Circular is hereby promulgated:

SECTION 1.Scope. This Circular shall apply to all Generation Companies and
Distribution Utilities in the country as defined in the EPIRA as well as the
National Transmission Corporation (TRANSCO) or its concessionaire,
presently the NGCP which is also referred to as the System Operator (SO);

SECTION 2. Responsibilities of Generation Companies. Pursuant to the

EPIRA, all Generation Companies shall ensure the availability of its generation
facilities at all times subject only to technical constraints duly communicated to
the SO in accordance with existing rules and procedures. For this purpose,
Generation Companies shall have the following responsibilities:

2.1 All Generation Companies shall operate in accordance with their

Maximum Available Capacity. For this purpose, the Maximum
Available Capacity shall be equal to the registered maximum
capacity of the (aggregate) unit less (1) forced unit outages, (2)
scheduled unit outages, (3) de-rated capacity due to technical
constraints which include (a) plant equipment-related failure and
ambient temperature, (b) hydro constraints which pertains to
limitation on the water elevation/turbine discharge and megawatt
output of the plant and (c) geothermal constraints which pertain to a,
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capacity limitation due to steam quality (chemical composition,
condensable and non-condensable gases), steam pressure and
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temperature variation, well blockage and limitation on steam and
brine collection and disposal system.

All Generation Companies shall submit its Maximum Available

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Capacity and operational status on a monthly basis to the DOE-

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 Electric Power Industry Management Bureau (EPIMB), with a copy
furnished to the SO and the Philippine Electricity Market
Corporation (PEMC);

2.2 Oil-based generation companies shall maintain an adequate in-

country stocks of fuel equivalent to at least 15-days running
inventory which includes shipments in transit. For this purpose, all
oil-based generation companies shall submit to DOE-EPIMB, on a
monthly basis, a report on fuel inventory based on typical load
dispatch and fuel consumption;

2.3 Coal power plants shall ensure the required 30-day coal running
inventory which includes shipments in transit. An inventory report
shall be submitted to the DOE-EPIMB, on a monthly basis, based
on typical load dispatch and fuel consumption schedule;

2.4 During the scheduled maintenance of Malampaya natural gas

facilities, all affected generation companies shall maintain at least
15-days running inventory of the alternative fuel and shall operate
at full capacity;

2.5 All generation companies with natural gas fired, geothermal and
hydroelectric generating plants shall submit to the DOE a monthly
report on the current status and a forecast of the energy sources of
its generating plants;

2.6 All Generation Companies must notify and coordinate with the
System Operator of any planned activity such as shutdown of its
equipment in accordance with the PGC;

2.7 Immediately inform the DOE of any unexpected shutdown or

derating of the generating facility or unit thereof. The report shall
include a description of the causes of the unexpected shutdown
and estimated resumption;

2.8 Generating Companies shall seek prior clearance from the DOE
regarding any plans for deactivation or mothballing of existing
generating units or facilities critical to the reliable operation of the
Grid; and

2.8 Strictly abide by the provisions of the PGC.

SECTION 3. Responsibilities of TRANSCO and/or its concessionaire.

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Pursuant to its mandate under the EPIRA, TRANSCO and/or its
concessionaire, presently NGCP, shall:

3.1 Ensure that transmission facilities pursuant to the TDP approved

by the DOE are adequately provided and available for access by all
electricity users in all areas of the grid. The NGCP, in the
preparation of the TDP shall include all the transrnjqsion
 requirements of the generation companies, distribution utilities and
suppliers. Any necessary modifications/adjustments duly
endorsed and approved by the DOE shall be incorporated in the
TDP by the NGCP prior to its finalization;

3.2 Undertake rigid evaluation of circumstances attendant prior to

approval of deactivated shutdown in accordance with the criteria
laid down in the System Operator Procedure Manual;

3.3 Submit to the DOE for consideration the Grid Operating and
Maintenance Program (GOMP) including any updates and monitor
the compliance of the generation companies thereof;

3.4 Immediately inform the DOE of any power interruptions or

existence of such threats. The report shall include a description of
the, magnitude, duration, causes and the areas affected, as well as
the contingency or mitigating measures that were undertaken; and

3.5 Ensure the institutionalization of the necessary connection

agreements with all the Grid Users (i.e., Generation Companies,
DUs and Direct Customers) and impose all the pertinent
requirements in the PGC.

SECTION 4. Responsibilities of Distribution Utilities. Distribution utilities

shall:

4.1 Regularly submit to the DOE the prescribed Distribution Utility

Development Plan (DDP) to monitor the existing, available, and
future supply requirements and the PDUs Monthly Operations
Report (MOR) and Monthly Financial and Statistical Report (MFSR)
for ECs;

4.2 Comply with all the requirements of the PGC and Philippine
Distribution Code (PDC) at all times and report sigmficant load
interruptions in its franchise area or any threats that may lead such
events;

4.3 Ensure that the power requirements within their franchise areas
are adequately covered by supply contracts or spot purchases from
the WESM at all times; and

4.4 In cases of Red Alert status as declared by the System Operator,

immediately submit to the DOE its manual -load dropping
schedule.

SECTION 5. Lead Agency. The DOE, being the agency tasked to supervise and
oversee the electric power industry, shall be the lead agency in ensuring that all
plans and programs to achieve the objectives of this Circular are properly
carried out.
SECTION 6. Monitoring, Enforcement and Compliance. The DOE, through
EPIMB, shall monitor the compliance of all Generation Companies, all
Distribution Utilities and the NGCP. The DOE, in consultation with the ERC,
shall formulate and implement enforcement and penalty mechanism in cases of
non-compliance to this Circular by the Generation Companies, Distribution
Utilities and the NGCP.

For the purpose of monitoring and assessing the overall reliability performance
of the Grid and the Grid User facilities, a Grid Reliability Task Force to
undertake the necessary studies and policy recommendations to the DOE and
ERC shall be created which members and specific task shall be defined in a
separate Circular.

SECTION 7. Regulatory Support. The ERC shall ensure the timely recovery
of generation cost of the power plants in accordance with existing laws and
procedures.

SECTION 8. Linkage with other government entities. The DOE may seek
assistance from other government agencies such as Bureau of Customs and
National Water Resources Board in the monitoring of the fuel inventory and
supply of water resources for power use.

SECTION 9. Effectivity. This Circular shall take effect immediately fifteen (15)
days from its publication in a newspaper of general circulation.

Signed this day of 2010 at the DOE, Energy Center, Merritt

Road, Fort Bonifacio, Taguig City, Metro Manila.
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