: E Republic of the Philippines DEPARTMENT OF ENERGY DEPARTMENT CIRCULAR No. DC2019- 62-0603 _m PROVIDING FOR THE FRAMEWORK GOVERNING THE OPERATIONS OF EMBEDDED GENERATORS WHEREAS, Section 2 of Republic Act No, 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), declared as the policy of the State to ensure the quality, reliability, security and affordability of the supply of electric power; WHEREAS, Section 37 of the EPIRA further mandates the Department of Energy (DOE) to supervise the restructuring of the electricity industry, and in addition thereto, to ‘formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy consistent with the approved national economic plan and with the policies on environmental protection and conservation and maintenance of ecological balance, and provide a mechanism for the integration, rationalization, and coordination of the various energy programs of the Government’: WHEREAS, Section 9 of the EPIRA provided that all generation facilities connected, directly or indirectly, to the transmission system shall be subject to central dispatch of the grid operator, subject to technical constraints, in accordance with the dispatch schedule submitted by the Market Operator (MO) and taking into account existing bilateral contracts. WHEREAS, Section 2 of Department Circular No. DC2017-05-0009 entitled “Declaring the Launch of the WESM in Mindanao and Providing for Transition Guidelines’ which took effect on 26 June 2017, states that “All Embedded Generators (a) with installed capacity of at least 5 MW; (b) with installed capacity below 5 MW that have a contract outside its host DU, or intends to sell to the WESM, or inject power to the Grid; and (c) all Feed-in-Tariff ("FIT") eligible RE plants shall be registered in the WESM. WHEREAS, the Electric Power Industry Participants raised several issues on the treatment of Embedded Generators (EGs) in terms of licensing, connection and operational requirements, market registration, dispatch, ancillary service provision and metering service requirements, WHEREAS, the DOE, cognizant of the need to address any policy gaps and ensure optimal utilization of EGs in the Philippines, conducted review of all relevant policies and guidelines and existing practices in other jurisdictions and presented to focus group discussions (FGDs) its concept paper containing its recommendations in various dates as follows: Page Lofs{ i i i | ES 22 May 2018 ‘The Mansion Hote, lloilo City 30 May 2018 Quest Hotel, Clark Pampanga 13 June 2018 The Greenleaf Hotel, General Santos City 25 June 2018 Cebu Parklane International Hotel, Cebu City WHEREAS, the DOE, in consideration of the inputs gathered during the FGDs, formulated a draft circular providing for policies on embedded generators which was subjected to public consultations on various dates as follows “23 August 2018 30 August 2018 Ace Hotel and Suites, Pasig City 20 September 2018 _N Hotel, Cagayan de Oro City NOW, THEREFORE, pursuant to its authority and mandate under the EPIRA and its, Implementing Rules and Regulations (IRR), and after due consideration of the inputs from various stakeholders, the DOE hereby issues, adopts and promulgates the following: Section 1. Guiding Principles. The DOE recognizes the role of EGs in augmenting supply and providing benefits to the power system. To maximize these benefits while mitigating potential adverse impact on grid reliability and security, EGs shall operate within the framework of: 1.1 Provision of Central Dispatch by the System Operator to EGs with material impact to Grid operations in the interest of achieving economic operation and maintenance of quality, stability, reliability and security of the transmission system, 1.2 Compliance to the EPIRA and its IRR, Philippine Grid Code (PGC), Philippine Distribution Code (PDC), WESM Rules and its Market Manuals, Philippine Electrical Code and other pertinent issuances by the DOE, Energy Regulatory Commission (ERC) and other relevant government instrumentalities having authority over the Grid reliability and supply security; and 1.3 Market share and bilateral contracts limitation under Section 45 of the EPIRA and other relevant regulations issued by the ERC concerning abuse of market power and competition. Section 2. Definition of Terms. The terms as used in this Circular shall have their respective meanings as follows: a) “Ancillary Services” refer to support services such as Primary Reserve, Secondary Reserve, Tertiary Reserve, Reactive Power Support and Black Start Capability which are necessary to support the transmission capacity and energy that are essential in maintaining Power Quality and the Reliability of the Grid Department Circular No, C2019-Q2- 0003 "Providing for the Framework Governing the Operations of Embedded Generators” Page 2 0f 8b) "Central Dispatch” refers to the process of issuing direct instructions to electric power industry participants by the Grid Operator, in accordance with the schedule provided by MO where WESM is operational, to achieve the economic operation and maintenance of quality, stability, reliability and security of the transmission system. ¢) "Distributed generation” refers to a system of small generation entities supplying directly to the distribution Grid, any one of which shall not exceed one hundred kilowatts (100 kW) in capacity. d) “Electric Power Industry Participant" refers to any person or entity engaged in the generation, transmission, distribution or supply of electricity. e) “Embedded Generator” refers to generating units that are indirectly connected to the Grid through the distribution system that supplies power to its host DU or the Grid 1) “End-User” refers to any person or entity requiring the supply and delivery of electricity for its own use. 9) “Grid” refers to the high voltage backbone system of interconnected transmission lines, substations and related facilities, located in each of Luzon, Visayas and Mindanao, or as may be determined by the ERC in accordance with Section 45 of the EPIRA. h) “Market Operator” refers to the entity responsible for the operation of the WESNM in accordance with the WESM Rules. i) “Maximum Stable Load or Pmax’ refers to the maximum demand in MW that a generating unit, or generating block or module in case of a combined cycle power plant, can reliably sustain for an indefinite period of time, based on the generator capability tests }) “Self-Generating Facilities" refer to power Generation Facilities owned and constructed by an End-User for such End-User's own consumption or internal use excluding Generation Facilities for use by households, clinics, hospitals and other medical facilities. &) “System Operator (SO)” refers to the party responsible for generation dispatch, or the implementation of the generation dispatch schedule of the MO, the provision of Ancillary Services, and operation to ensure safety, power quality, stability, reliability and security of the Grid. All other terms used but not defined in this Circular shall have the same meaning as defined in the EPIRA, its IRR, PGC, PDC, WESM Rules and its Market Manuals. Department Circular No. 0C2019-02- 0008 “Providing for the Framework Governing the Operations of Embedded Generators” Page 3 of 8Section 3. Scope and Application. This Circular shall apply to the following entities: a) Embedded Generators (EGs); ) Distribution Utilities (DUs) c) Metering Service Providers (MSPs) d) Market Operator (MO); e) Transmission Network Provider (TNP); and #) System Operator (SO). Self-Generating Facilities, Distributed generation for net metering purposes and off- grid generation facilities are excluded from the scope of application of this Circular. Section 4. Licensing Requirements. The following shell govern licensing requirements of EGs: 4.1, AIL EGs shall secure a Certificate of Compliance from the ERC pursuant to existing guidelines on licensing of generation facilities. 4.2, DUs owning and entering into supply agreements with affiliate EGs shall comply with the existing guidelines, including but not limited to: 4.2.1, Market share and bilateral contract limitations pursuant to the Section 45 of EPIRA; and 4.2.2. Competitive Selection Process Rules. Section 5. Connection and Operational Requirements. The following shall govern the connection and operational requirements of EGs: 5.1. All EGs shall comply with the connection and operational requirements of the DC. 5.2. EGs mandated to register in the WESM, in accordance with Section 5 of this Circular, shall 5.2.1. Cooperate with the TNP in ensuring that the Remote Terminal Units (RTUs) and communication links are installed in accordance with the specifications provided in the PDC and PGC; 5.2.2. Cooperate with their WESM MSP in ensuring that their metering installations, including revenue meters and instrument transformers, are installed in accordance with the specifications provided in the PDC, WESM Rules and relevant Market Manuals; 5.2.3. Cooperate with their WESM MSP, the TNP, the MO and the SO in ensuring the appropriate location of their RTUs, communication links and metering installations relative to the connection point, market Department Circular No. DC2019-02- 0003 “Providing for the Framework Governing the Operations of Embedded Generators” Page 4of 8trading node and scheduling points pursuant to the PDC, PGC, WESM Rules and relevant Market Manuals; and 5.2.4. Prior to construction, seek endorsement from the DOE for the conduct of Grid Impact Study and System Impact Study, where applicable. Section 6, Market Registration and Participation. The following shall govern the registration and participation of EGs in the WESM 6.1. The following EGs shall register in the WESM 6.1.1. with Pmax equal to or above the following regional thresholds: a) 10 MW for Luzon Grid: b) 5 MW for Visayas Grid: and ©) 5 MW for Mindanao Grid 6.1.2. with Pmax below regional thresholds that have a contract outside its host DU, or intends to sell to the WESM, or inject power to the Grid; and 6.1.3. FIT eligible RE plants 6.2. EGs that do not meet the above criteria may register in the WESM on a voluntary basis. 6.3. End-Users with generating units exporting power to the Grid or distribution system shall register in the WESM both as Customer and Generation Company. i | | ‘ i | : | ) } j : 6.4. EGs mandated to register in the WESM shall be classified under the Generation Company category in accordance with the WESM Rules and Market Manuals. 6.5. EGs and their host DUs shall cooperate with the MO in modeling connections from the transmission-level feeder to the EG, which materially affect dispatch schedules and prices in the WESM, into the Market Network Model The DOE, in coordination with the MO and SO, shall review the criteria for mandatory registration annually and may revise the same, as necessary Section 7. Dispatch. The following shall govern the dispatch of EGs registered in the WESM: 7.1. The EGs shall comply with the Central Dispatch instructions issued by the SO, through the host DU, in accordance with the PGC, PDC, WESM Rules and Market Manuals and other applicable dispatch guidelines, Department Circular No, 0C2019-02- 0003 “Providing for the Framework Governing the Operations of Embedded Generators” Page 5 of 8/ ‘ ’ 7.2. The SO, in coordination with MO and host DUs, shall establish a protocol for the dispatch of EGs scheduled in the WESM for provision of energy and initiate amendments to the Dispatch Protocol Manual and other relevant Market Manuals for the approval of the DOE. Section 8 Ancillary Services. The following shall govern the provision of Ancillary Services by the EGs: 8.1, EGs shall be allowed to provide Ancillary Services, subject to the criteria provided in the PGC, PDC and other applicable guidelines on ancillary service utilization 8.2. The SO, in coordination with the MO and host DUs, shall establish a protocol for the dispatch of EGs scheduled for provision of Ancillary Services and initiate amendments to the Dispatch Protocol Manual and other relevant Market Manuals for the approval of the DOE, Section 9. Metering Services. The following shall govern the provision of metering services to the EGs: 9.1. Only entities duly authorized by the ERC to provide metering services in the WESM shall be allowed to provide metering services to EGs registered in the WESM. 9.2, The said entities shall register in the WESM as MSP and ensure provision of metering installation and services in accordance with the requirements of the PDC, WESM Rules and Market Manuals and other applicable guidelines. Section 10. Additional Responsibilities of DUs. DUs with EGs connected or seeking connection to its network shall 10.1. Develop or enhance appropriate internal business procedures for the connection of EGs to its distribution network, consistent with the PGC, PDC and other applicable guidelines 10.2. Ensure that operation of EGs connected to its distribution network is pursuant to the standards set forth in the PGC, PDC and other applicable guidelines; 10.3. Coordinate with SO with regard to connection of EGs that are mandated to register in the WESM. 10.4. Report to the MO any EGs within its franchise area that are mandated to register in the WESM and assist the same in registering in the WESM; and 10.5. Ensure transparent and fair imposition of Distribution Wheeling Service charges in accordance with the applicable guidelines issued by the ERC. Department Circular No. 0C2019-02- 0003 “Providing for the Framework Governing the Operations of Embedded Generators” Page 6 of 8t L l i i Se n 11. Additional Responsibilities of the MO. The MO shall: 11.1, Submit to the Rules Change Committee proposed changes to the WWESM Rules and Market Manuals in accordance with the policy provided herein, as necessary: 11.2. Ensure registration of all EGs mandated to register in the WESM: and 11.3. Submit regular reports to the DOE with respect to the status of registration of EGs in the WESM and their impact to market operations. Section 12. Additional Responsibilities of the TNP. The TNP shall: 12.1. Ensure provision of monitoring, control and communication equipment in accordance with the PGC, PDC, WESM Rules and Market Manuals and other applicable guidelines; and 12.2 Submit regular reports to the DOE with respect to the status of installation of monitoring. control and communication equipment to EGs. Section 13. Additional Responsibilities of the SO. The SO shall 13.1 Conduct Grid Impact Study and System Impact Study on the connection of EGs, upon the endorsement of the DOE. 13.2. Ensure that monitoring, control and dispatch of EGs mandated to register in the WESM are in accordance with the PGC, PDC, WESM Rules and relevant Market Manuals and other applicable guidelines; and 13.3. Submit regular reports to the DOE with respect to the impact of EGs to Grid operations Section 14. Regulatory Support. The ERC shall ensure the provision of support in the regulatory requirements and approvals consistent with the policies set forth under this Circular and in accordance with existing laws and procedures. It shall also formulate guidelines or revise existing guidelines, as necessary, to support the implementation of this Circular. These guidelines may include, but not limited to, the following a) PGC, b) PDC; ©) Ancillary Service Procurement Plan; d) Open Access Transmission Rules; e) Distribution Service Open Access Rules: f) Framework for Competitive Metering Services; g) Licensing of WESM MSPs; and h) Rules for Issuance of Certificate of Compliance. Department Circular No. DC2019-(2-0003_ “Providing for the Framework Governing the Operations of Embedded Generators” Page 7 of &The ERC shall also implement enforcement and penalty mechanisms in cases of non-compliance to this Circular by any Electric Power Industry Participant identified herein. Section 15. Separability Clause. If for any reason, any section or provision of this Circular is declared unconstitutional or invalid, such parts not affected shall remain valid and subsisting Section 16, Repealing Clause. Any department circular or issuance, contrary to or inconsistent with this Circular is hereby repealed, modified or amended accordingly. Section 17. Effectivity. This Circular shall take effect fifteen (15) days after publication in at least two (2) newspapers of general circulation Let copy of this Circular be furnished the University of the Philippines Law Center - Office of National Administrative Register (UPLC-ONAR), Issued this __ 2019 at the DOE, Energy Center, Rizal Drive, Bonifacio Global City, Taguig City, Metro Manila. \ bdbncod olf | Secretary (i, vA -AGc19090200 wi FEBO8 2019 Department Circular No, 0C2019-02.0003. “Providing for the Framewark Governing the Operations of Embedded Generators” Page 8 of 8