WHEREAS, Section 2 of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 or EPIRA, declared as a policy of the State, among others, to ensure the quality, reliability, security and affordability of the supply of electric power, to protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power, and to encourage the efficient use of energy and other modalities of demand side management;

WHEREAS, pursuant to Section 37(h) of EPIRA, the Department of Energy (DOE) exercises supervision and control over all government activities relative to energy projects in order to attain the goals embodied in Section 2 of Republic Act No. 7638, known as the œDepartment of Energy Act of 1992 , as amended by EPIRA and that the DOE is authorized under Section 5(k) thereof to formulate rules and regulations as may be necessary to implement the objectives of said R.A. No. 7638, as amended;

WHEREAS, Section 37 of EPIRA further provides for the following powers and functions of DOE, among others:

œxxx

(d) Ensure the reliability, quality and security of supply of electric power;

(e) Following the restructuring of the electricity sector, the DOE shall, among others:

(i) Encourage private sector investments in the electricity sector and promote development of indigenous and renewable energy sources;

(ii) Facilitate and encourage reforms in the structure and operations of distribution utilities for greater efficiency and lower costs;

(iii) In consultation with other government agencies, promote a system of incentives to encourage industry participants, including new generating companies and end-users to provide adequate and reliable electric supply;

xxx

(i) Develop policies and procedures and, as appropriate, promote a system of energy development incentives to enable and encourage energy participants to provide adequate capacity to meet demand including, among others, reserve requirements

xxx

(m) 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, the cooperation of all electric power industry participants and various stakeholders is indispensable in achieving a reliable and secure supply of electricity in the country;

WHEREAS, the current power situation in the Visayas Grid demonstrated the need for additional capacity as certified by the System Operator (SO) of the National Transmission Corporation to meet the increasing demand and reserve;

WHEREAS, the new generating plants in the Visayas Grid as reported by the private proponents to the DOE are expected yet to come on stream by 2010 and 2011;

WHEREAS, the availability and adequacy of electricity in the Visayas Grid at this time is vested with public interest such that it is incumbent upon the government to take the necessary measures to ensure the continuous operation of vital industries in the region by ensuring that there will be no interruptions in the delivery of electricity;

NOW, THEREFORE, premises considered, the DOE is issuing this Circular with the objective of ensuring that the declared policies of the State under EPIRA are properly achieved and implemented:

SECTION 1. Scope and Coverage. This Circular shall apply to all DOE-attached agencies namely, the National Power Corporation ( œNPC ), National Transmission Corporation ( œTransCo ) through its System Operator, Power Sector Assets and Liabilities Management Corporation (PSALM), Philippine Electricity Market Corporation (PEMC), National Electrification Administration ( œNEA ), Philippine National Oil Company (PNOC) and relevant Visayas stakeholders such as Distribution Utilities (DUs) including Electric Cooperatives (ECs) in the Visayas grid, Independent Power Producers (IPPs) or other power generation companies and major power users, shall collaborate in ensuring the provision of adequate and reliable supply of electric power in the Visayas Grid.

Further, this Circular provides for the power supply contingency measures in the Visayas grid to include, but not be limited to, a supply augmentation program until new generating capacities come on stream. This also serves as reiteration of the existing mandates of the agencies and industry participants under the energy sector.

SECTION 2. Responsibilities. In addition to the functions and responsibilities of the agencies and entities under their respective charters and under existing laws, rules and regulations, they are further directed to closely coordinate with the Department and extend their full support in adopting the following measures in the Visayas Grid. 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 purposes of this Circular are properly carried out.

NPC

(a) Ensure that all power plants including those of its contracted IPPs shall operate in accordance with the declared individual dependable capacities. All maintenance outage of power plants shall be in accordance with the Grid Operation and Maintenance Program (GOMP) under the Philippine Grid Code. A report containing the list of plants and their operational status should be submitted on a monthly basis to DOE, through the Electric Power Industry Management Bureau (DOE-EPIMB), with a copy furnished the SO and Market Operator (MO).

(b) Secure oil-based power plants/IPPs to meet the average required 30-day fuel oil inventories/supply. For this purpose, oil-based power plants/IPPs shall submit to DOE-EPIMB, on a monthly basis, a report on fuel inventory based on typical load dispatch and fuel consumption.

(c) Provide an average 45-day coal inventory in all coal power plants. For this purpose, an inventory report should be submitted to DOE-EPIMB on a monthly basis based on typical load dispatch and fuel consumption.

(d) Guarantee the readiness of all oil-based power plants for operation;

(e) Inform and update NPC customers on the power supply situation, and the corresponding load curtailment schedules.

TransCo/ National Grid Corporation of the Philippines (NGCP)

(a) Implement maintenance of major transmission line/s and substation equipment that will add to load limitation to generating plant/unit only during weekends and non-working holidays, and perform system tests and Ancillary Services certification tests only during weekends and non-working holidays. A monthly report should be submitted to DOE for this purpose.

(b) Effect load curtailment in distribution utilities (private utilities and ECs) without specific contracts or supply arrangements with NPC/PSALM and other generation companies. For this purpose, the œno contract, no connection  policy shall be strictly enforced.

(c) Ensure that the manual load dropping schedule is updated and in place.

(d) Enforce strictly the disconnection policy, in coordination with NPC.Report immediately to the DOE Secretary and the DOE designated focal person, in the most expedient manner available, if there are any changes in the normal operation of the power system.

PSALM

(a) Determine, together with DOE and NPC, if there is a resulting instability in the supply of power in the continued execution of the current privatization program being implemented by PSALM inasmuch as the 70% of NPC ™s generating assets has been bidded out. This is for purposes of Section 71 of EPIRA.

(b) Coordinate the required operation of disposed assets in the Visayas Grid with the new owners, as the case may be.

NEA

(a) Inform properly the ECs of the situation and its possible impact to the system. Towards this end, NEA shall render appropriate assistance to the ECs in ensuring their readiness to (i) respond to any event arising from the problem and (ii) take appropriate measures to mitigate the problem by entering into any power supply contracts and/or (iii) assist ECs in the development of available renewable energy sources.

(b) Advice ECs with customers having self-generating capability to effect necessary preparations to ensure readiness of the embedded generating sets participating in the supply augmentation program of the government.

(c) Assist ECs in promoting energy conservation measures for the electricity consumers.

(d) Submit monthly reports to DOE on the status of the regular activities undertaken together with the ECs in the performance of their responsibilities under this Circular.

NEA is hereby directed to submit to DOE within two weeks after the effectivity of this circular a detailed plan and program to implement its responsibility.

PEMC

(a) Continue with its preparations for the possible launch of the commencement of the commercial operations of the WESM in the Visayas.

(b) Submit to the DOE a detailed plan to implement the transition to the commercial operations of the WESM.

DUs/ECs

(a) Take cognizance and assume full responsibility to forecast, assure and contract for the supply of electric power in their franchise areas to meet their obligations as distribution utility.

(b) Limit their actual demand to their contracted demand/load, particularly during peak hours.

(c) Submit regularly to DOE the prescribed Distribution Development Program (DDP) in compliance with DOE Circular No. DC 2003-012-011 to monitor the existing, available and future supply requirements.

(d) Submit to DOE customers having self-generating capability to effect necessary preparations to ensure readiness of their generating sets in case of participation in the Supply Augmentation Program of the government;

In addition, the DOE declares the following:

SECTION 3. Supply Side Management. A Supply Augmentation Program is hereby introduced.

a) The PEMC, in coordination with NGCP/SO, is hereby directed to formulate a comprehensive Supply Augmentation Program (the œProgram ) including the timetable of activities, which shall be submitted for approval by the DOE within two weeks from the effectivity of this Circular. The Program shall be implemented in the Visayas grid immediately subject to the following conditions:

(i) Consistent with the objectives of the government ™s energy development program and shall comply with the provisions of the EPIRA, its Implementing Rules and Regulations and, in applicable cases, the WESM Rules.

(ii) Include, among other things, mechanisms for participation and provision of power supply by embedded generators and other self-generation facilities; demand-side participation such as the provision of interruptible load as ancillary service; and the corresponding pricing and compensation mechanism and, if appropriate, the provision of incentives for participants.

(iii) Specify the duration for the implementation of the Program, the criteria or grounds for its termination.

b) Upon approval by the DOE of the Program, PEMC, in coordination with the NGCP-SO, shall be responsible for the implementation of the same, and, either individually or jointly, shall -

(i) Secure the necessary approvals and comply with necessary regulatory requirements, including but not limited to the approval by the Energy Regulatory Commission (ERC) and other relevant government agencies on the implementation of the Program or of any mechanism or procedure contained therein, such as, but not limited, to scheduling, dispatch, pricing and compensation methodologies.

(ii) Formulate rules, guidelines and procedures for the implementation of the Program, in consultation with the electric power industry participants.

(iii) Establish the criteria, requirements and qualifications for participation in the Program, and to register qualified participants.

(iv) Facilitate the provision of the necessary infrastructure, facilities and equipment including development of protocols or any mechanism as may be necessary to implement the Program. For this purpose, secure the necessary regulatory approvals for the cost recovery mechanisms by NGCP-SO and PEMC of the costs incurred for the development, establishment and operations of the Program.

(v) Implement the Program, in accordance with the approved rules, procedures and guidelines; and

(vi) Submit monthly reports to the DOE as well as other related reports as may be required from time to time.

c) All electric industry participants are directed to participate in the Program, in accordance with this Circular, and the rules, guidelines and procedures as may be issued and promulgated by the NGCP-SO, PEMC and the DOE, from time to time.

SECTION 4. Renewable Energy Development. The Renewable Energy Management Bureau, as created by Republic Act No. 9513 (the œRenewable Energy Act of 2008 ), or the responsible DOE Bureau/s or entities involved in the renewable energy resource development shall:

(a) Assess the maximum contribution of renewable energy resources for power generation to the Visayas Grid.

(b) Require the renewable energy service con tractors to prepare plans and ensure readiness to maximize the use of renewable energy sources to ensure stability of power supply.

SECTION 5. Demand Side Management - The Energy Utilization Management Bureau of the DOE, in coordination with other concerned DOE units and relevant entities, is hereby directed to develop a market-oriented demand side management program which shall likewise be submitted to the DOE Secretary for approval.

All electric power stakeholders herein mentioned are encouraged to adopt the demand side management program to be developed as prescribed herein including, but not limited to, the engagement of energy service companies (ESCOs) to achieve the purposes of this Circular.

SECTION 6. Regulatory Support. The DOE and the Energy Regulatory Commission (ERC) shall closely coordinate in order that the applications filed with the ERC to specifically address the Visayas grid supply issues be duly resolved and acted upon expeditiously through the use of modes such as, but not limited to, Section 4(e) Rule 3 of the Implementing Rules and Regulations of EPIRA as amended in June 2007.

SECTION 7. Nothing in this Circular shall be construed as to amend, supplant, or repeal any of the mechanisms or institutions already existing or responsibilities already allocated and provided for under any existing law, rule or contract.

SECTION 8. Effectivity and Publication. This Circular shall be effective immediately upon its publication in two (2) newspapers of general circulation.

This Circular shall remain in effect until otherwise revoked.

Adopted: 16 Jan. 2009

(SGD.) ANGELO T. REYES
Secretary