Amendments to WESM Net Settlement Surplus Rules

Applies to Generation Companies, Distribution Utilities (DUs), and End-users.
Includes Retail Electricity Suppliers (RES), Local RES, Supplier of Last Resort (SoLR), and other suppliers.
Covers Philippine Electricity Market Corporation (PEMC) and other relevant industry participants.

Act: Republic Act No. 9136 (Electric Power Industry Reform Act of 2001).
Bilateral Power Supply Contracts: Contracts for physical electricity supply excluding financial derivatives and certain sales.
Direct/Indirect WESM Member: Entities registered or allowed to trade in WESM.
Distribution Utility (DU): Entities with exclusive distribution franchise.
End-user: Consumer of electricity.
ERC: Regulatory Commission overseeing the electric power industry.
Net Settlement Surplus (NSS): Surplus remaining after WESM market transactions, including transmission fees.
Network Service Provider: Entity managing transmission or distribution systems.
Other terms relate to market participants and operational roles within WESM.

NSS arises due to locational marginal pricing accounting for transmission losses and congestion.
Price differences between generator and customer nodes create NSS or possible deficit.
NSS calculated per trading interval as total collectibles minus total payables.
Surplus reflects economic rentals from binding constraints.

NSS allocated to Direct WESM Members: DUs, RES (including Local RES and SoLR), Generators acting as end-users, IPP Administrators, and others who paid line loss and congestion charges.
NSS allocated to DUs/RES must be immediately re-distributed to respective end-users.
NSS for Indirect WESM Members is re-distributed via Direct Members.
No NSS allocation during market price administration, suspension, or secondary price caps.

PEMC includes NSS amounts immediately in settlement statements for current billing period.
DUs redistribute received NSS to captive customers proportionate to consumption.
RES redistribute NSS to competitive retail market end-users; deficit may be collected from them.
Generators receiving NSS adjust their monthly settlement amounts accordingly.

NSS allocated pro-rata based on each participant’s line loss and congestion charge payments.
Allocation formula incorporates locational marginal prices, metered quantities, and line rental charges per trading interval.
Line loss and congestion charges computed only if metered quantity indicates withdrawal; otherwise, only line rental applies.

Deficit occurs when payables exceed collectibles.
Application, allocation, and re-distribution of deficit follow the same rules as surplus.

PEMC to submit regular monthly reports to market participants and ERC summarizing NSS or deficit, metered quantities, marginal losses, and congestion costs.
Annual comparison reports analyzing NSS levels, allocations, and underlying factors.
PEMC to engage external auditor for annual NSS audit and submit results within three months after calendar year-end.
DUs and RES must submit monthly NSS-related reports to ERC, including re-distribution details.
Direct WESM Members responsible for reporting on behalf of Indirect Members.

PEMC retaining NSS beyond allowed period pays interest at 91-day T-bill rate plus 300 basis points.
DUs and RES failing to redistribute NSS timely also subject to same interest penalties.

Rules apply to Luzon, Visayas, and Mindanao grids, effective immediately after publication.
Future amendments to Price Determination Methodology (PDM) may supersede current NSS formulas and procedures.

Invalidity of any provision does not affect the enforceability of remaining provisions.

ERC empowered to impose fines and penalties per administrative sanction guidelines under EPIRA Section 46.