WHOLESALE ELECTRICITY 

SPOT MARKET RULES 

^_FOREWORD 

The Wholesale Electricity Spot Market (WESM) Rules establishes the basic rules, requirements and procedures that govern the operation of the Philippine electricity market.  The WESM Rulesidentifies and recognizes and sets the responsibilities of the Market Operator, System Operator, WESM Participants, and the PEM Board.  These groups shall comply with and are bound by all the provisions of the WESM Rules.  The WESM Rulesare intended to be complimentary with the Grid Codeand Distribution Code, all of which are meant to ensure the development of an appropriate, equitable and transparent electricity market, along with a safe, reliable, and efficient operation of the power system. 

Republic Act No. 9136, also known as the “Electric Power Industry Reform Act of 2001” (Act), mandates the Department of Energy (DOE) to establish the WESMwithin one (1) year from its effectivity.  The Actalso mandates the DOE, jointly with the electric power industry participants, to formulate the detailed rules for the WESM. 

The WESM is the market where trading of electricity will be made.  It shall be governed by the Philippine Electricity Market Board(PEM Board).  The PEM Boardshall provide the policies and guidelines of the WESMcontained in the Implementing Rules and Regulations of the Act, WESM Rules, and such other relevant laws, rules and regulations. 

The Market Operator,a non-stock, non-profit organization, shall administer the operation of the WESMin accordance with the WESM Rules.  For the first year, the Market Operator’sfunctions shall be provided by the Autonomous Group Market Operator(AGMO) under the administrative supervision of the National Transmission Corporation (TRANSCO).  After the first year, the Market Operatorshall be an independent entity.  Thereafter, the administrative supervision of the TRANSCOover such entity shall cease. 

The WESM Rulesis organized into eleven (11) Chapters. These are: 

Chapter 1.   Introduction 

Chapter 2.   Registration 

Chapter 3.    The Market 

Chapter 4.   Metering 

Chapter 5.    Market Information and Confidentiality 

Chapter 6.   Intervention and Market Suspension 

Chapter 7.   Enforcement and Disputes 

Chapter 8.    Rules Change Process 

Chapter 9.   Interpretation 

Chapter 10.  Transitory Provisions 

Chapter 11.  Glossary 

WESM RULES 2002 

TABLE OF CONTENTS                 

Chapter                                    Description                                                    Page

Foreword ................................................................................................................. ii

1      Introduction.............................................................................................................1

1.1Scope of chapter 1..............................................................................................1

1.2          Purpose and Application of Rules .......................................................................1

1.2.1           The Philippines Wholesale Electricity Spot Market Rules ....................1

1.2.2Purpose of the WESM Rules...............................................................1

1.2.3The Regulatory Framework .................................................................2

1.2.4Scope of Application............................................................................2

1.2.5        WESM Objectives................................................................................2

1.3          Market Operator and SYSTEM OPERATOR.......................................................3

1.3.1           Responsibilities of the Market Operator...............................................3

1.3.2           Market Operator Performance.............................................................4

1.3.3           Responsibilities of the System Operator..............................................5

1.4          Governance of the Market...................................................................................5

1.4.1           Philippine Electricity Market (PEM) Board............................................5

1.4.2           Composition of the PEM Board............................................................6

1.4.3           Appointment to the PEM Board............................................................8

1.4.4           Voting Rights .......................................................................................8

1.4.5           Obligations of the PEM Board..............................................................9

1.4.6           Formation of Committees .................................................................. 10

1.5          The Philippines Electricity Market Auditor ......................................................... 10

1.5.1           Responsibilities of the Auditor............................................................ 10

1.5.2           Review of WESM Rules..................................................................... 11

1.6          Market Surveillance Committee......................................................................... 11

1.6.1           Appointment to the Market Surveillance Committee .......................... 11

1.6.2           Responsibilities of the Market Surveillance Committee...................... 11

1.7          Technical Committee ........................................................................................ 12

1.7.1           Appointment to the Technical Committee .......................................... 12

1.7.2           Responsibilities of the Technical Committee..................................... 12

1.8          Enforceability and Amendment of These Rules................................................. 13

1.8.1           Enforceability..................................................................................... 13

1.8.2           Changes to the WESM Rules............................................................ 13

1.9          Public Consultation Procedures ........................................................................ 13

2      Registration........................................................................................................... 15

2.1Scope of chapter 2............................................................................................ 15

2.2          General............................................................................................................. 15

2.2.1           Scope of Application.......................................................................... 15

2.2.2Registration ....................................................................................... 15

2.2.3           Registration in Multiple Categories.....................................................16

2.2.4           WESM Members................................................................................16

2.3          Categories of WESM member...........................................................................16

2.3.1           Generation Company.........................................................................16

2.3.2           Customer ...........................................................................................17

2.3.3           Trading Participant.............................................................................18

2.3.4           Network Service Provider...................................................................19

2.3.5           Ancillary Services Provider.................................................................19

2.3.6    Metering Services Provider ................................................................20

            2.3.7         System Operator................................................................................20

2.4          Indirect WESM Members...................................................................................21

2.5          Applications for Registration..............................................................................21

2.5.1           Application process............................................................................21

2.5.2           Prerequisites for applicants................................................................21

2.5.3           Further information to assess application...........................................21

2.5.4           Approval of applications .....................................................................21

2.5.5    Notice of approval of application ........................................................22

2.5.6           Notice of non-approval of application .................................................22

2.5.7           Market Operator to maintain a list ......................................................22

2.6          Ceasing to be a WESM Member .......................................................................23

2.6.1           Notifying the Market Operator ............................................................23

2.6.2    Date of cessation ...............................................................................23

2.6.3          Notifying all WESM Members.............................................................23

            2.6.4         Market Operator notification of cessation...........................................23

2.7          Suspension........................................................................................................24

2.7.1           Grounds for Suspension.....................................................................24

2.7.2           Effect of a suspension notice .............................................................24

2.8          Deregistration ...................................................................................................24

2.8.1           Deregistration of a Trading Participant...............................................24

2.8.2           Obligations and liabilities following deregistration...............................24

2.8.3           Deregistration procedure development...............................................24

2.9          Intending WESM Members................................................................................25

2.9.1           Registration as an Intending WESM Member.....................................25

2.9.2           Applications for registration................................................................25

2.9.3           Notice of cessation of registration ......................................................25

2.9.4    Activities of Intending WESM Members..............................................25

            2.9.5        Rights and obligations of Intending WESM Members.........................25

2.10       Market Fees.................................................................................................26

2.10.1        Imposing Market Fees........................................................................26

2.10.2   Structure and Level of Market Fees ...................................................26

2.10.3Guiding Principles ..............................................................................26

2.10.4        Components of Market Fees..............................................................26

2.10.5        Publication of Market Fees Structure .................................................27

2.11       Budget.........................................................................................................27

2.11.1        Submission of annual statements and other documents ....................27

2.12       Financial Year Report ..................................................................................27

2.12.1        Market Operator to prepare report......................................................27

2.12.2        Providing copy of report .....................................................................28

3 The Market .............................................................................................................29

3.1  Scope of chapter 3............................................................................................ 29

3.2  Market Network Model, Trading Nodes, and Pricing Zones............................... 29

3.2.1           Market Network Model....................................................................... 29

3.2.2           Market Trading Nodes ....................................................................... 30

3.2.3           Customer Pricing Zones .................................................................... 31

3.3Ancillary services .............................................................................................. 32

3.3.1           Introduction........................................................................................ 32

3.3.2           Ancillary Services Contracting by the System Operator..................... 32

3.3.3Ancillary Services Agreements .......................................................... 33

3.3.4Reserve Market Arrangements.......................................................... 34

3.3.5Ancillary Services Cost Recovery ...................................................... 34

3.3.6Provision of Ancillary Services........................................................... 35

3.3.7       Approval, Periodic Review and Evaluation of Ancillary Service 

Arrangements.............................................................................................. 36

3.4Market trading interval and timetable ................................................................ 36

3.4.1           Trading Intervals................................................................................ 36

3.4.2           Timetable........................................................................................... 37

3.5Submission of Offers, Bids, and Data ............................................................... 37

3.5.1Communications of Offers and Bids .................................................. 37

3.5.2Network Service Provider Data.......................................................... 37

3.5.3System OperatorData....................................................................... 38

3.5.4Load Forecasting............................................................................... 39

3.5.5           Generation Offers and Data............................................................... 39

3.5.6           Customer Demand Bids..................................................................... 40

3.5.7           Generation Company Reserve Offers................................................ 40

3.5.8           Customer Reserve Offers.................................................................. 40

3.5.9           Revision of Standing Offers/Bids ....................................................... 41

3.5.10        Initial setting of Market Offers/Bids.................................................... 41

3.5.11Revision of Market Offers/Bids .......................................................... 42

3.5.12Confirmation of Receipt of Valid Offers and Bids............................... 43

3.5.13      Over-riding Constraints...................................................................... 43

3.6Market Dispatch Optimization Model................................................................. 44

3.6.1           Model Definition................................................................................. 44

3.6.2           Constraint Violation Coefficients........................................................ 46

3.6.3Interpretation of Model Outputs ......................................................... 47

3.6.4Modelling Approximations.................................................................. 47

3.6.5Model Development........................................................................... 47

3.6.6        Market Settlement.............................................................................. 48

3.7Market Projections ............................................................................................ 48

3.7.1           Week Ahead Projections ................................................................... 48

3.7.2           Day Ahead Projections ...................................................................... 48

3.7.3Preparation of Market Projections...................................................... 48

3.7.4        Published Information........................................................................ 50

3.8Scheduling and Dispatch Implementation ......................................................... 51

3.8.1           Responsibilites of the Market Operator.............................................. 51

3.8.2           Responsibilities of the System Operator............................................ 51

3.8.3           Communication of target loading levels ............................................. 52

3.8.4           Dispatched Trading Participants........................................................ 52

3.8.5           Ramp Rate of Trading Participant...................................................... 52

3.8.6           Deviations from the Ramp Rate......................................................... 52

3.8.7           Dispatch Tolerances...........................................................................52

3.8.8           Sanctions of Trading Participants.......................................................53

3.9Treatment of Load Shedding and Excess Generation .......................................53

3.9.1           Direction To Conduct Load Shedding.................................................53

3.9.2           Market Operator Advice On Load Shedding.......................................53

3.9.3           System Operator Responsibility to Initiate Load Shedding.................53

3.9.4           Advising of Load Shedding.................................................................54

3.9.5           Revising Forecasts.............................................................................54

3.9.6           Pricing Error Notice............................................................................54

3.9.7Management of Load Shedding .........................................................54

            3.9.8         Management Procedures for Excess Generation...............................54

      3.10      Determination of Market Prices....................................................................55

3.10.1        Calculation of Prices...........................................................................55

3.10.2        Determination of Ex-Ante Nodal Energy Price....................................55

3.10.3Determination of Ex-Ante Zonal Energy Prices ..................................55

3.10.4Publishing Ex-Ante Prices According to Timetable.............................55

3.10.5        Pricing Error Notice............................................................................55

3.10.6        Determination of Ex-Post Nodal Energy Price....................................56

3.10.7        Procedures for Ex-Post Nodal Energy Price.......................................57

3.10.8        Determination of Ex-Post Zonal Energy Prices...................................57

3.10.9        Determination of Ex-Ante And Ex-Post Energy Settlement Prices......57

3.10.10      Determination of Zonal Reserve Price................................................57

      3.11       Market Information.......................................................................................58

3.11.1        Market Information.............................................................................58

3.11.2        Access to Information.........................................................................58

      3.12      Financial Transmission Rights .....................................................................59

3.12.1Market for transmission rights. ...........................................................59

3.12.2Publication of Rental Information........................................................59

3.12.3        Further Transmission Rights ..............................................................59

3.12.4        Matters to Consider in Assessment....................................................59

3.12.5Issuing Transmission Rights ..............................................................59

            3.12.6       Accounting for Net Income.................................................................60

      3.13      Settlement Quantities and Amounts.............................................................60

3.13.1        Submission of Bilateral Contract Data................................................60

3.13.2        Submission of Transmission Right Data.............................................61

3.13.3Data for Bilateral Contracts and Transmission Rights ........................61

3.13.4Zonal Reserve Settlement Quantity....................................................61

3.13.5        Defining the Gross Ex-Ante Energy Settlement Quantity for  Market 

Trading Nodes.............................................................................................62

3.13.6        Defining the Gross Ex-Post Energy Settlement Quantity for  Market 

Trading Nodes.............................................................................................62

3.13.7        Energy Settlement Quantity Adjustments for Bilaterals ......................63

3.13.8        Determining the Ex Ante Energy Trading Amount..............................63

3.13.9        Determining the Ex Post Energy Trading Amount..............................63

3.13.10Determining the Reserve Trading Amount .........................................64

3.13.11Determining the Reserve Cost Recovery Charge...............................64

3.13.12Calculation of Line Rental Trading Amounts ......................................64

3.13.13Determining the Transmission Rights Trading Amount ......................64

3.13.14Settlement Amounts for Trading Participants.....................................65

3.13.15      Settlement Amounts for the Network Service Provider.......................66

3.13.16      Treatment of Remaining Settlement Surplus ..................................... 66

3.14Settlement Process ..................................................................................... 67

3.14.1        Settlements Management by Market Operator .................................. 67

3.14.2        Electronic Funds Transfer.................................................................. 67

3.14.3        Payment of Settlement Amount ......................................................... 67

3.14.4        Preliminary Statements...................................................................... 67

3.14.5        Final Statements................................................................................ 68

3.14.6        Payment by Trading Participants....................................................... 68

3.14.7        Payment to Trading Participants........................................................ 68

3.14.8        Disputes............................................................................................. 68

3.14.9        Settlement Revisions......................................................................... 69

3.14.10      Payment of Adjustments.................................................................... 69

3.14.11      Payment Default Procedure............................................................... 70

3.14.12      Interest on Overdue Amounts............................................................ 72

3.15Prudential Requirements............................................................................. 72

3.15.1        Purpose............................................................................................. 72

3.15.2        Provision of Security.......................................................................... 72

3.15.3        Form of Security ................................................................................ 73

3.15.4  Amount of Security ............................................................................ 73

3.15.5          Replacement Security........................................................................ 74

3.15.6        Drawdown of Security........................................................................ 74

3.15.7        Suspension of a WESM Member....................................................... 75

3.15.8        Trading Limits.................................................................................... 76

3.15.9        Monitoring.......................................................................................... 76

3.15.10      Margin Calls....................................................................................... 77

3.15.11      Confidentiality.................................................................................... 78

4      Metering................................................................................................................. 79

4.1Scope of chapter 4............................................................................................ 79

4.2          APPLICATION OF CHAPTER........................................................................... 79

4.3          Obligations of TRADING Participants................................................................ 79

4.3.1           Obligations......................................................................................... 79

4.3.2           Election of a Metering Services Provider by a Trading Participant..... 80

4.3.3           Metering Services Provider Obligations ............................................. 80

4.4          Registration of Metering Services Providers...................................................... 80

4.5          Metering Installation.......................................................................................... 81

4.5.1           Metering Installation Components...................................................... 81

4.5.2           Location of Metering Point................................................................. 81

4.5.3           Meter Accuracy.................................................................................. 82

4.5.4           Use of Meters .................................................................................... 82

4.5.5           Security of Metering Equipment......................................................... 82

4.5.6           Security of Metering Data Held in a Metering Installation................... 83

4.5.7           Performance of Metering Installations................................................ 83

4.5.8           Meter Time ........................................................................................ 83

4.6          Metering Data ................................................................................................... 84

4.6.1           Changes to Metering Data................................................................. 84

4.6.2           Data Transfer and Collection............................................................. 84

4.7          Deregistration of Metering Services Providers................................................... 84

4.7.1           Settlement with inaccurate metering information ............................... 84

4.7.2   Sanctions for inaccurate metering information................................... 85

4.7.3           Notice following material breach of WESM Rules...............................85

4.7.4           Deregistration following unethical act.................................................85

4.7.5           Effect of deregistration for unethical act.............................................85

4.8          Databases .........................................................................................................85

4.8.1           Installation Databases........................................................................85

4.8.2           Metering Database.............................................................................86

4.8.3           Rights of Access to Metering Data.....................................................86

4.8.4           Confidentiality.....................................................................................86

4.8.5           Payment for Access to Metering Data................................................87

4.9          Data Validation and Substitution........................................................................87

4.10       Processes and Review.................................................................................87

4.11       Transitory Provision.....................................................................................87

5      Market Information and Confidentiality...............................................................88

5.1  Scope of chapter 5 ............................................................................................88

5.2  Market Information and Confidentiality...............................................................88

5.2.1           Provision of Information......................................................................88

5.2.2           Systems and Procedures ...................................................................89

5.2.3           Participant Data..................................................................................89

5.2.4           Planning and Design Data..................................................................90

5.2.5           Information Records...........................................................................90

5.2.6           Market Audit.......................................................................................90

5.3Confidentiality....................................................................................................91

5.3.1           Confidentiality.....................................................................................91

5.3.2           Exceptions..........................................................................................91

5.3.3           Conditions..........................................................................................93

5.3.4           Indemnity to the Market Operator.......................................................93

5.3.5           Survival ..............................................................................................93

5.3.6           The Market Operator Information.......................................................94

6      Intervention and Market Suspension...................................................................95

6.1  Scope of chapter 6 ............................................................................................95

6.2  Overview............................................................................................................95

6.2.1           Preparation and Responses...............................................................95

6.2.2           Exemption from Liability due to Market Suspension and 

Intervention………......................................................................................96

6.2.3           Administered Price Cap......................................................................96

6.3Emergencies .....................................................................................................96

6.3.1           Emergency.........................................................................................96

6.3.2           Emergency Procedures......................................................................98

6.4Emergency Planning by WESM Participants .....................................................99

6.4.1           WESM Participant Emergency Contacts............................................99

6.4.2           WESM Participant Procedures...........................................................99

6.4.3           Emergency Procedures Awareness ...................................................99

6.5Response to an Emergency ............................................................................100

6.5.1           Declarations and Directions in an Emergency..................................100

6.5.2           Intervention Due to Emergency........................................................101

6.6System Security...............................................................................................102

6.6.1           System Security and Reliability Guidelines.......................................102

6.6.2           Notice of Threat to System Security................................................. 102

6.6.3           Response to System Security Threat............................................... 103

6.6.4           Market Response to Threat to System Security............................... 103

6.6.5           Intervention Due to System Security Threat..................................... 104

6.7Force Majeure................................................................................................. 104

6.7.1           Force majeure event........................................................................ 104

6.7.2           Force majeure event........................................................................ 105

6.7.3           Notification....................................................................................... 105

6.7.4           Obligations of WESM Participants................................................... 105

6.8Market Suspension ......................................................................................... 105

6.8.1           Conditions for Suspension of the Market ......................................... 105

6.8.2           Declaration of Market Suspension................................................... 105

6.8.3           Effect of Market Suspension............................................................ 106

6.8.4           Intervention Report .......................................................................... 106

6.8.5           Market Suspension Report .............................................................. 107

7      Enforcement and Disputes................................................................................. 108

7.1Scope of chapter 7.......................................................................................... 108

7.2          Enforcement.................................................................................................... 108

7.2.1           Compliance...................................................................................... 108

7.2.2           Breaches of the WESM Rules by WESM Participants..................... 108

7.2.3           Alleged Breaches of the WESM Rules by the Market Operator or 

System Operator....................................................................................... 110

7.2.4           Investigations................................................................................... 111

7.2.5           Sanctions......................................................................................... 111

7.2.6           Actions by Agents, Employees or Officers of Participants................ 112

7.2.7           Publication....................................................................................... 112

7.3          DISPUTE RESOLUTION ................................................................................ 112

7.3.1           Application and Guiding Principles................................................... 112

7.3.2    Appointment of Dispute Resolution Administrator and Panel Group 113

7.3.3           Dispute Management Systems........................................................ 114

7.3.4           Dispute Resolution Process............................................................. 114

7.3.5           The Dispute Resolution Panel.......................................................... 116

7.3.6    Disputes About Payment ................................................................. 117

7.3.7         Disputes Affecting Final Statements................................................ 117

7.3.8           Legal Representation....................................................................... 117

7.3.9        Cost of Dispute Resolution .............................................................. 118

7.3.10         Effect of Resolution ......................................................................... 118

7.3.11      Recording and Publication............................................................... 118

7.3.12        Judicial Review................................................................................ 118

7.3.13        Limitation of Liability ........................................................................ 119

7.3.14        Indemnity......................................................................................... 119

8      Rule Change........................................................................................................ 120

8.1Scope of chapter 8.......................................................................................... 120

8.2          Rule Change Committee................................................................................. 120

8.2.1           Establishment of Rule Change Committee ...................................... 120

8.2.2   Composition of Rule Change Committee......................................... 120

8.2.3           Membership requirements – PEM Board ......................................... 120

8.2.4           Termination......................................................................................121

8.2.5           Appointment termination ..................................................................121

8.2.6           Resignation......................................................................................121

8.2.7           Conduct of meetings ........................................................................121

8.2.8           Advice and assistance......................................................................121

8.3          Referral of Matters to the Rule Change Committee.........................................121

8.3.1           Rule change proposals.....................................................................121

8.3.2           Form of submission..........................................................................121

8.3.3           PEM Board obligations.....................................................................122

8.4          Consideration of Proposed Rules Change by the Rules Change Committee...122

8.4.1           Assessment of proposed Rule change.............................................122

8.4.2    Discretions when assessment proposed Rule change .....................122

8.4.3      Notification following failure to satisfy criteria ...................................123

8.4.4           Notification following satisfying criteria.............................................123

8.4.5           Submissions regarding proposed Rule change................................123

8.4.6           Consideration of submissions...........................................................123

8.4.7           Approval of proposed Rule change ..................................................123

8.5          Consideration of Proposed Rules changes by the PEM Board ........................124

8.5.1           PEM Board assessment of proposed Rule change ..........................124

8.5.2           PEM Board discretions when assessing proposed Rule change......124

8.5.3           Notification following unsuccessful proposal.....................................124

8.5.4           Submitting proposed Rule change for approval................................125

8.6          Approval of Proposed Rules Changes.............................................................125

8.6.1           DOE assessment of proposed Rule change.....................................125

8.6.2           DOE discretions when assessing proposed Rule change.................125

8.6.3           Notification following failure to satisfy criteria ...................................125

8.6.4           Approval of proposed Rule change ..................................................126

8.6.5           Report by the Rules Change Committee..........................................126

8.7          Rules Change Committee Indemnity ...............................................................126

9      Interpretation.......................................................................................................127

9.1General............................................................................................................127

9.2          Time and Dates...............................................................................................128

9.3          Assignment......................................................................................................128

9.4          Waiver.............................................................................................................129

9.5          Payment ..........................................................................................................129

9.5.1           Method of payment ..........................................................................129

9.5.2           Interest rates....................................................................................129

9.6          Notices ............................................................................................................129

9.6.1           Properly giving notices .....................................................................129

9.6.2           Notices treated as being given.........................................................130

9.6.3           Form of notice..................................................................................130

9.6.4           Calculating a specified period for notices.........................................131

9.6.5           General............................................................................................131

9.7          Retention of Records and Documents.............................................................131

9.8          Severability......................................................................................................131

      10.1      PURPOSE AND SCOPE ...........................................................................132

10.1.1        Purpose............................................................................................132

10.1.2        Scope of Application.........................................................................132

      10.2      MARKET TRANSITION .............................................................................132

10.2.1        Establishment of the Wholesale Electricity Spot Market .................. 132

10.2.2        The Market Operator ....................................................................... 132

10.2.3        The Governing Board ...................................................................... 133

10.2.4        Membership to the WESM............................................................... 133

10.3Provisions for the interim wesm................................................................. 134

10.3.1        Spot Market Trading........................................................................ 134

10.3.2        Ancillary Services............................................................................. 134

10.3.3        Market Dispatch Optimization Model................................................ 134

10.3.4        Metering........................................................................................... 135

10.4ACTIONS TO BE TAKEN PRIOR TO SPOT MARKET COMMENCEMENT 

DATE .............................................................................................................. 135

10   Glossary ..............................................................................................................143

Appendices.......................................................................................................... 159

Appendix A.......................................................................................................... 160

Appendices to Chapter 3.................................................................................... 160

Appendix A1. Information to be Supplied with Offers to Supply and to Buy Electricity

........................................................................................................................ 161

A1.1 Generation Offer........................................................................................... 161

A1.2 Reserve Offers ............................................................................................. 161

A1.3 Demand Bids................................................................................................ 162

Appendix A2. Information to be Supplied by Network Service Provider................. 163

Appendix B.......................................................................................................... 164

Appendices to Chapter 4.................................................................................... 164

Appendix B1. Metering Register........................................................................... 165

Appendix B2.  Installation Database ..................................................................... 166

Appendix C Appendices to Chapter 7 ............................................................... 167

Background Note to Appendix C1 – Classification of Rules.................................. 168

CHAPTER 1 

^{_INTRODUCTION} 

            1.1      SCOPE OF CHAPTER 1 

(a)    Purpose of the WESM Rules; 

(b)    Parties bound by the WESM Rules; 

(c)    Responsibilities of the Market Operator; 

(d)    Responsibilities of the System Operator; 

(e)    Composition and functions of the PEM Board; 

(f)     Responsibilities of the PEM Auditor; 

(g)    Responsibilities of the Market Surveillance Committee;

(h)    Responsibilities of the Technical Committee; and (i) Public consultation procedures. 

            1.2      PURPOSE AND APPLICATION OF RULES 

1.2.1 About the Philippines Wholesale Electricity Spot Market Rules 

1.2.1.1 This document shall be known as the Wholesale Electricity Spot Market Rules (“WESM Rules”). 

1.2.1.2 Formulated jointly with electric power industry participants; 

1.2.1.3 Promulgated by the DOE; 

1.2.1.4 In the WESM Rules, words and phrases that appear in italics are defined in the glossary in chapter 11.  

1.2.1.5 The WESM Rules shall be interpreted in accordance with the provisions of chapter 9, objectives of the Act and other provisions of law. 

1.2.2 Purpose of the WESM Rules 

The WESM Rulesare promulgated to implement the provisions of the Act, its Implementing Rules and Regulations and other related lawsas well as to: 

(a)    Promote competition; 

(b)    Provide an efficient, competitive, transparent and reliable spot market; 

(c)     Ensure efficient operation of the WESMby the Market Operatorin coordination with the System Operatorin a way which: 

(1)  Minimizes adverse impacts on system security; 

(2)  Encourages market participation; and 

(3)  Enables access to the spot market. 

(d)    Provide a cost-effective framework for resolution of disputes among WESM Participants,and between WESM Participantsand the Market Operator; 

(e)    Provide for adequate sanctions in cases of breaches of the WESM Rules; 

(f)      Provide efficient, transparent and fair processes for amending the WESM Rules; 

(g)    Provide for the terms and conditions to which entities may be authorized to participate in the WESM; 

(h)    Provide the authority and governance framework of the PEM Board; and 

(i)      Encourage the use of environment-friendly renewable sources of energy in accordance with the Act. 

1.2.3 The Regulatory Framework 

1.2.3.1 The Actmandates the Department of Energy (DOE) to promulgate the detailed rules for the WESM, which it shall formulate jointly with the Electric Power Industry Participants. 

1.2.3.2 To ensure a greater supply and rational pricing of electricity, the Actprovides the Energy Regulatory Commission (ERC) the authority to enforce the rules and regulations governing the operations of the electricity spot market and the activities of the spot Market Operatorand other participants in the spot market. 

1.2.3.3 The WESM Rulesform part of the regulatory framework which is applicable to the owners, operators and users of the power systemunder the Act.

1.2.3.4 On matters pertaining to financial and technical standards set for Generation Companies, TRANSCO, Distribution Utilities, and Suppliers, inconsistencies between the WESM Rules, the Grid Code and the Distribution Code, may be referred to the ERC for resolution only. 

1.2.4 Scope of Application 

Pursuant to Section 30 of the Act, all WESM Participantsshall comply with the WESM Rulesand applicable laws or regulations of the Philippines. 

1.2.5 WESM Objectives 

The objectives of the spot marketare to establish a competitive, efficient, transparent and reliable market for electricity where: 

(a)   A level playing field exists among WESM Participants; 

(b)   Trading of electricity is facilitated among WESM Participantswithin the spot market;

(c)   Third parties are granted access to the power systemin accordance with the Act;

(d)   Prices are governed as far as practicable by commercial and market forces; and 

(e)   Efficiency is encouraged. 

            1.3      MARKET OPERATOR AND SYSTEM OPERATOR 

1.3.1 Responsibilities of the Market Operator

1.3.1.1 The Market Operatorshall, generally and non-restrictively, have the following functions and responsibilities: 

(a)     Administer the operation of the WESM in accordance with the WESM rules;  

(b)     Allocate resources to enable it to operate and administer the WESM on a non-profit basis;  

(c)     Determine the dispatch scheduleof all facilities in accordance with the WESM Rules.  Such schedule shall be submitted to the System Operator. 

(d)     Monitor daily trading activities in the market. 

(e)     Oversee transaction billing and settlement procedures; and 

(f)       Maintain and publish a register of all WESM Participants and update and publish the register whenever a person or entity becomes or ceases to be aWESM Participant.  

1.3.1.2 In performing clause 1.3.1.1 (d), the Market Operator shall: 

(a)     Determine whether or not such trading is performed in accordance with the WESM Rules; 

(b)     Identify any significant variations in and between trading intervals; and 

(c)     Identify any apparent or suspected incidents of anticompetitive behaviorby any WESM Member. 

1.3.1.3 The Market Operatorshall, in consultation with WESM Participants, develop guidelines as to what constitutes a significant variation. 

1.3.1.4 If theMarket Operator identifies any significant variations, theMarket Operator shall, prepare and publish a report explaining the identified significant variations within ten business days from the cognizance thereof. 

1.3.1.5 TheMarket Operator shall provide a printed copy of the completed report referred to in clause 1.3.1.4 to:

(a) The DOE and the ERC;  

(b)      ThePEM Board; and 

(c)      WESM Members and interested entitieson request. 

1.3.1.6 Where the WESM Rulesrequire theMarket Operator to develop procedures, processes or systems, theMarket Operator shall do so after taking into consideration the likely costs to WESM Participants of complying with those procedures or processes and of obtaining, installing or adopting those systems, as the case may be and consistent with the purpose set forth in clause 1.2.2, the Market Operatormay recommend changes to these procedures in accordance with the Rule Change process set out in Chapter 8. 

1.3.1.7 The Market Operatorshall: 

(a)         Comply with each of the requirements and obligations imposed on it under the WESM Rules, Grid Code, and other applicable laws or regulations; 

(b)         Implement the transitory provision specified in Chapter 10;  

(c)         Perform those actions that are required to be taken prior to the spot market commencement date, as specified in the WESM Rulesand clause 10.4 hereof; and 

(d)         Develop appropriate cost recovery processes to cover its liabilities in the event of damage or injury, which may be caused by its acts or omissions in the faithful performance of its functions. 

1.3.1.8 The Market Operator shall ensure that thedispatchschedulescomply with any constraints notified by the System Operator in accordance with clause 6.6.1. 

1.3.2 Market Operator Performance 

1.3.2.1 In exercising its discretions and performing its obligations under the WESM Rules, the Market Operator shall:  

(a)         Act in accordance with any standard of performance provided for by any statute, regulation or authorization condition to which theMarket Operator is subject; 

(b)         Act in a reasonable and prudent manner;  

(c)         Act in good faith;  

(d)         Take into consideration, act consistently with and use its reasonable endeavors to contribute towards the achievement of the WESM objectives; and 

(e)         Ensure an audit trail of documentation that is fully adequate to substantiate and reconstruct all relevant actions performed. 

1.3.2.2 Clause 1.3.2.1 does not prevent theMarket Operator from performing any obligation under the WESM Rules. 

1.3.2.3 Every year, the Market Operator shall prepare and publish performance indicators which monitors and provides an indication of, the Market Operator’s performance under the WESM Rules with respect to: 

(a)           The Market Operator’s responsibilities under the WESM Rules; and 

(b)           The achievement of the WESM objectivesas defined in clause 1.2.5. 

1.3.3 Responsibilities of the System Operator 

Under these Rules, the System Operator shall have the following functions and responsibilities: 

(a)       Be responsible for and operate the power systemin accordance with the WESM Rules, the Grid Codeand any instruction issued by the Market Operatoror the ERC.

(b)       Provide central dispatchto all generation facilities and loads connected, directly or indirectly, to the transmission system in accordance with the dispatch schedulesubmitted by the Market Operator.

(c)       Contribute towards the development of procedures, processes or systems, or to assist with any aspect of the operation of the spot market, in coordination with the Market Operator.

(d)       Implement the transitory provisions specified in Chapter 10; and 

(e)       Perform those actions that are required to be taken prior to the spot market commencement dateas specified in the WESM Rulesand clause 10.4. 

            1.4      GOVERNANCE OF THE MARKET 

The WESM governance is the process by which decisions are made and implemented within the market to ensure attainment of the WESM objectives under clause 1.2.5. 

1.4.1 Philippine Electricity Market (PEM) Board 

1.4.1.1 The WESMshall be governed, and its powers and functions exercised by the PEM Board.  

1.4.1.2 In addition to the powers of a corporation under the Corporation Code and those stated herein, the PEM Board shall have all powers necessary, convenient and incidental to the performance of its functions and responsibilities in accordance with the WESM Rules. 

1.4.1.3 In performing its functions, the PEM Board shall act in a reasonable, ethical and prudent manner, which facilitates an efficient, competitive, transparent and reliable spot marketand is consistent with the WESM objectives. 

1.4.1.4 The PEM Board may delegate any of its functions, obligations and powers to a committee or other entity in circumstances when it is reasonable, at its judgment, to do so. 

1.4.1.5 The PEM Boardshall conduct its business activity in accordance with its Articles and By-laws and other applicable laws, rules or regulations. 

1.4.2 Composition of the PEM Board 

1.4.2.1 Composition of the PEM Board shall be in accordance with the following criteria:  

(a)             Each sectors of the electric power industry shall be represented in the PEM Board;  

(b)             The number of representatives of each sector of the Philippine electric power industry should be such that no one sector of the industry can dominate proceedings or decision-making by the PEM Board; and be selected in such a way that deadlocks in decision-making processes should be avoided; 

(c)             There should be sufficient independent directors appointed to the PEM Board to balance the number of directors representing the Philippines electric power industry; and 

(d)             Be set out in detail in clause 1.4.2.4 so as to reflect and be consistent with the criteria stated herein. 

1.4.2.2 If at any time the structure or size of the Philippine electric power industry or any sector within it changes so that the detailed composition of the PEM Boardas set out in clause 1.4.2.4 is no longer reflective of or consistent with clause 1.4.2.1, clause 1.4.2.4 shall be amended in accordance with the Rules change process in chapter 8 and consequential changes to the PEM Boardshall be made as soon as practicable so that the PEM Boardreflects and is consistent with the principles set out in clause 1.4.2.1. 

1.4.2.3 For the purposes of this clause 1.4.2 the electric power industry is comprised of the following sectors, viz.: (a)   Distribution; 

(b)         Generation; 

(c)         Transmission; 

(d)         Supply, sale and purchase by entities other than those which undertake activities in the distribution, generationand transmission sectors. 

1.4.2.4 The PEM Board shall consist of: 

(a)         One (1) Directorrepresenting the Market Operator;

(b)         One (1) Directorrepresenting the National Transmission Company (TRANSCO); 

(c)         Four (4) Directorswho are nominated by WESM Membersregistered under clause 2.3.4 as Distribution Utilities, provided that: 

(1)       Two (2) of those Directors are representatives of and nominated by Electric Cooperatives; and 

(2)       Two (2) of those Directors are representatives of and nominated by Distribution Utilities which are not Electric Cooperatives; 

(d)         One (1) Director who is representative of and nominated by Customers, including but not limited toSuppliers;

(e)         Four (4) Directors who are representatives of and nominated by Generation Companiesregistered under clause 2.3.1;  (f) Four (4) Directors who are: 

(1)       Independent of the Philippines electric power industry and the Government; 

(2)       Not eligible to be appointed as a representative under clauses 1.4.2.3 (a), (b), (c), or (d); and 

(3)       Nominated by WESM Members; 

(g) A Chairperson who is one of the four independent Directors of the PEM Board and who is elected by a majority of all members of the the PEM Board.  The first Chairperson of the PEM Board, however, shall be the DOESecretary in accordance with the Implementing Rules and Regulations of the Act. 

All of the above representatives shall formally be appointed in accordance with clause 1.4.3. 

1.4.2.5 A Director of the PEM Boardmay only serve on the PEM Board at any point in time as a representative of one category of representative under clause 1.4.2.4. 

1.4.2.6 A company, firm or business, which is represented on the PEM Boardin one category under clause 1.4.2.4, may not be represented by an individual in any other category under clause 1.4.2.4, regardless of whether the company, firm or business has interests in more than one sector of the Philippines electricity industry. 

1.4.2.7 For the purposes of this clause 1.4.2, a person is deemed to be independent of the Philippine electric power industry if that person: 

(a)           Is not an employee, contractor, agent, manager, director or shareholder of a WESM Member;

(b)           Is not a relative of a person, within the fourth civil degree of consanguinity or affinity, of an employee, contractor, agent, manager, director or shareholder of a WESM Member; 

(c)           Is not an employee, contractor, agent, manager, director or shareholder of a company, affiliate or any other entity related to or associated with a WESM Member, where: 

(1)  A related company or body, is a parent or holding company of the WESM Member, a subsidiary or affiliate of the WESM Member or a subsidiary of a holding company of the WESM Member; and  

(2)  An associate is a person who is a director, manager or shareholder of that related company or entity or a relative of such a person; 

(d)           Has not been employed by any electric power industry 

participant, or a company or body related to or associated with a WESM Participant  (as defined in clause 1.4.2.7 (c)) within two years prior to the nomination date; and  

(e)           Agrees not to be employed by and does not accept employment with any electric power industry participant, or a company or body related to or associated with a WESM Member(as defined in clause 1.4.2.7 (c)) within one year after the person ceases to be a Director.

1.4.3 Appointment to the PEM Board 

1.4.3.1    Thedirectors of the PEM Boardshall be appointed by the DOEin accordance with the required composition of the PEM Boardas set out in clause 1.4.2, having regard to the expertise necessary for the PEM Boardto carry out its functions and any relevant provisions of the Corporation Codes of the Philippines in relation to the appointment of directors. 

1.4.3.2    With effect from the date on which the Independent Market Operator assumes the duties, functions and responsibilities of the AGMO, all new appointments or re-appointments of Directorsand the Chairpersonof the PEM Boardare to be made in accordance with the required composition of the PEM Boardas set out in clause 1.4.2. 

1.4.4         Voting Rights 

1.4.4.1 Unless, expressly stated otherwise herein, provisions of the Corporation Code shall apply, provided that: 

(a)           A majority of the total number of Directors, each having one vote, shall constitute a quorum for the transaction of business of the PEM Board. 

(b)           Every decision of at least a majority of votes of Directorspresent in meeting shall be valid as a PEM Boardact.  If voting is equal, the Chairpersonhas a casting vote; (c) Directors cannot attend or vote by proxy at board meetings. 1.4.4.2 A Directoror the sector or company that he represents, who: 

(a)     Has a direct or indirect material pecuniary interest in a matter being considered, or is about to be considered by the PEM Board; and 

(b)     The interest may, or may reasonably, be considered to be in conflict with the proper performance of the Director’s duties in relation to the consideration of the matter, 

shall, as soon as practicable after the relevant facts become known, or ought reasonably to have been known, shall disclose the nature of the interest at a meeting of the PEM Board. 

1.4.4.3 A disclosure under clause 1.4.4.2 shall be recorded in the minutes of the meeting and, unless the PEM Boardotherwise determines, the Director: 

(a)     Shall not be present during any deliberation of the PEM Boardin relation to that matter; and 

(b)     Shall not take part in any decision of the PEM Boardin relation to that matter. 

1.4.4.4 Notwithstanding clause 1.4.4.2, a Director appointed to the PEM Board as a representative of a sector of the Philippine electric power industry is permitted to take into consideration matters relevant to that sector of the industry when considering and deciding on matters before the PEM Board. 

1.4.5 Obligations of the PEM Board 

1.4.5.1 The PEMBoardshall at all times: 

(a)       Fulfill its obligations under the WESM Rules;

(b)       Act in a manner that is consistent with the WESM Rules; 

(c)       Perform all things reasonably necessary to contribute toward the achievement of the WESM and the Act’sobjectives; 

(d)       Duly consider and take into account the provisions of the WESM Rules, when deciding whether or not to approve any matter for which the PEM Board’s approval or agreement is required under the WESM Rules;  

(e)       Promptly notify the ERC of all relevant information relating to potential breach with a recommendation on action to be taken; and 

(f)        Perform all other things that the PEM Board considers reasonably necessary to promote the WESM objectivesand improve the operation of the WESM as well as the WESM Rules. 

1.4.5.2 The following are the powers and duties of the PEM Board: 

(a)       Oversee and monitor the activities of the Market Operator and the System Operator to ensure that they fulfill theirresponsibilities under the WESM Rules, and acting in a manner consistent with the WESM Rules;

(b)       Form Committees in accordance with clause 1.4.6; 

(c)       Oversee and monitor the activities of the working groups established under clause 1.4.6 to ensure that they fulfill their responsibilities under and in accordance with the WESM Rules; 

(d)       Oversee and monitor the activities of WESM Members to ascertain and determine compliance or non-compliance with the WESM Rules; and 

(e)       Oversee the process by which changes to the WESM Rulesare proposed and made in accordance with clause 8.2 and other clauses contained herein. 

1.4.6 Formation of Committees 

The PEM Board shall form working groups and appoint qualified personnel who shall act as the following: 

(a)       The PEM Auditor to conduct audits of the operation of the spot marketand of the Market Operatorin accordance with clause 1.5; 

(b)       A Market Surveillance Committee to monitor and report on activities in the spot market in accordance with clause 1.6; 

(c)       A Technical Committeeto monitor and review technical matters under and in relation to the WESM Rules, the Grid Code and Distribution Code in accordance with clause 1.7; and 

(d)       ARules Change Committeeto assist the DOEin relation to the revision and amendment of the WESM Rulesin accordance with chapter 8. 

(e)       ADispute Resolution Administrator to facilitate the mediation of the dispute between the parties to reach resolution within a specified period of time in accordance with the dispute resolution process under chapter 7. 

1.5      THE PHILIPPINES ELECTRICITY MARKET AUDITOR 

1.5.1 Responsibilities of the Auditor 

The PEM Auditor shall: 

(a)    Conduct annual audits of the Market Operator andthe settlement system and any other procedures, persons, systems or other matters relevant to the spot market; 

(b)    Test and check any new items or versions of software provided by the Market Operatorfor use by WESM Members;  

(c)     Review any procedures and practices which are covered by the WESM Rules at the direction of the PEM Board;  

(d)    Recommend changes to the WESM Rules where the PEM Auditor detects deficiencies as a consequence of an audit, review, test, check or other form of review; and 

(e)    Publishon the market information websitethe results of any findings and recommendations under this clause 1.5.1. 

1.5.2 Review of WESM Rules 

The PEM Auditormay appoint a qualified team of auditors to carry out a review of the schedulingand centraldispatch processes under the WESM Rules. 

            1.6      MARKET SURVEILLANCE COMMITTEE 

1.6.1 Appointment to the Market Surveillance Committee 

1.6.1.1 The PEM Board shall appoint persons to form a Market Surveillance Committee in such number and with such skills and expertise, and on such terms and conditions, as the PEM Board reasonably deems to be appropriate, taking into consideration the nature of the obligations and functions of the Market Surveillance Committee, as set out in clause 1.6.2. 

1.6.1.2 The members of the Market Surveillance Committeeshall be independent of the Philippine electric power industry and the Government.

1.6.2 Responsibilities of the Market Surveillance Committee 

The Market Surveillance Committeeshall from time to time as necessary and appropriate, and whenever the PEM Board directs:

(a)  Monitor activities conducted by WESM Participantsin the spot market; 

(b)  Prepare periodic reports, which outline:  

(1)   Activities of WESM Participants in the spot market; 

(2)   Apparent or suspected incidents of anti-competitive behaviorby any WESM Participant; and 

(3)   Matters concerning the operation of thespot marketgenerally,  which reports shall be submitted to the PEM Board, the DOE and ERC upon completion; 

(c)  Assist the PEM Board to verify and assess: 

(1)   Applications for registration of WESM Members under the WESM Rules; and 

(2)   The eligibility of WESM Members to be registered under the WESM Rules; 

(d)  Assist the PEM Boardto investigate: 

(1)   Unusual or suspicious behavior or activities of WESM Members in the spot market;  

(2)   Suspected or alleged breaches of the WESM Rulesby WESM Members; and 

(3)   Suspected or alleged anti-competitive behavior;

(e)  From time to time if the Market Surveillance Committee in its discretion deems necessary or appropriate, propose amendments to the WESM Rulesin accordance with chapter 8 with a view to: 

(1)   Improving the efficiency and the effectiveness of the operation of the WESM; and 

(2)   Improving or enhancing the prospects for the achievement of the WESM objectives; 

(f)    Assist the Rules Change Committee in relation to its assessment of proposals to amend the WESM Rules under chapter 8. 

1.7      TECHNICAL COMMITTEE 

1.7.1 Appointment to the Technical Committee 

The PEM Board shall appoint persons to form a Technical Committee, taking into consideration the nature of the obligations and functions of the Technical Committee, as set out in clause 1.7.2. 

1.7.2 Responsibilities of the Technical  Committee 

In addition to its obligations and functions under the Grid Code and Distribution Code(if any), the Technical Committee shall from time to time as necessary and appropriate, and whenever the PEM Board directs: 

(a)   Monitor technical matters relating to the operation of the spot market; 

(b)   Provide a report to the PEM Board on any matter of a technical nature relating to any WESM Member which in the reasonable opinion of the Technical Committee, causes: 

(1)       ThatWESM Participant to be unable to comply with the WESM Rules; or 

(2)       Unintended or distortionary effects to the operation of the WESM; 

(c)   Assist the PEM Board by providing expertise in relation to: 

(1)       Information technology; 

(2)       Meteringtechnology and metering data; and 

(3)       Anyothermatter of a technical nature relating to the spot market; 

(d)   From time to time if the Technical Committeein its discretion deems necessary or appropriate, propose amendments to the WESM Rulesin relation to technical matters, in accordance with chapter 8 with a view to:  

(1)       Improving the efficiency and the effectiveness of the operation of the spot market; and 

(2)       Improving or enhancing the prospects for the achievement of the WESM objectives; and 

(e)   Assist the Rules Change Committee in relation to its assessment of proposals of a technical nature to amend the WESM Rulesunder chapter 8. 

            1.8      ENFORCEABILITY AND AMENDMENT OF THESE RULES 

1.8.1 Enforceability 

These Rules are enforceable in accordance with chapter 7.

1.8.2 Changes to the WESM Rules 

Amendments to the WESM Rulesshall be made in accordance with chapter 8. 

            1.9      PUBLIC CONSULTATION PROCEDURES 

Where the WESM Rulesidentify matters that are subject to review or consultation in accordance with the public consultation procedures, thePEM Board shall ensure that, as a minimum, the following procedures are followed: 

(a)     The PEM Boardshall publishin at least two (2) newspapers of national circulation particulars of the matter to WESM Participantsand other interested persons, inviting written submissions concerning the matter to be made by a specified date; 

(b)     Where, in the reasonable opinion of the PEM Board, there is a diversity of views expressed in the written submissions received under clause 1.9(a), the PEM Board shall invite WESM Participants and other interested persons to a meeting or meetings at which those views may be presented and discussed.  Non-members, who may be deemed interested persons may be invited to attend subject to the discretion of the PEM Board; 

(c)     Following its consideration of the matter under consultation, the PEM Boardshall prepare a report setting out: 

(1)     The matter under consultation; 

(2)     The PEM Board’sdecision in relation to the matter; 

(3)     The reasons for thePEM Board’sdecision;

(4)     The findings on material questions of fact, referring to evidence or other material on which those findings were based; and 

(5)     The procedures followed in considering the matter. 

(d)     The PEM Board shall provide a copy of the report referred to in clause 1.9 

(c) to: 

(1)     TheDOE and the ERCon completion of the report; and 

(2)     WESM Participants and interested persons on request. 

CHAPTER 2 

^{_REGISTRATION} 

            2.1      SCOPE OF CHAPTER 2 

This chapter 2 sets out: 

(a)     The categories of WESM Members; 

(b)     The procedure for registration as a WESM Member, including registration as an Intending WESM Member; 

(c)     The procedure for ceasing to be a WESM Member;

(d)     The procedure for suspension of a WESM Memberand liability of 

Deregistered WESM Members; and 

(e)     The procedure for recovery of the Market Operator’scosts and expenses. 

            2.2      GENERAL 

2.2.1 Scope of Application 

Other than the Market Operator, the WESM Rulesapply to: 

(a)     System Operator; 

(b)     Generation Companies; 

(c)     Ancillary Services Provider; 

(d)     Distribution Utilities; 

(e)     Suppliers; 

(f)      Metering Services Providers; 

(g)     Bulk consumers/End-users; and 

(h)     Other similar entities authorized by the ERCto become members of the WESM. 

All of which are WESM Participants. 

2.2.2 Registration 

2.2.2.1 Trading Participants:  

(a)       Shall register with the Market Operatorunder clauses  

2.3.1, 2.3.2 or 2.4 as either a Direct WESM Memberor an Indirect WESM Member; and 

(b)       Are bound by the WESM Rulesupon registration with the Market Operator.

2.2.2.2    Network Service Providersregistered by the Market Operatorunder clause 2.3.4 are bound by the WESM Rules. 

2.2.2.3    Ancillary Services Providers: 

(a)       Shall register with the Market Operatorunder clauses 2.3.5 or 2.4 as either a Direct WESM Member or an Indirect WESM Member; and 

(b)       Are bound by the WESM Rulesupon registration with the Market Operator.

2.2.2.4    Metering Services Providers registered by the Market Operator under clause 2.3.6 are bound by the WESM Rules. 

2.2.2.5    ASystem Operator registered by the Market Operatorunder clause 2.3.7 is bound by the WESM Rules. Other similar entities shall secure authorization from ERCto become eligible as members of the WESM. 

2.2.3      Registration in Multiple Categories 

If a person or an entity undertakes activities in two or more of the categories listed in clause 2.2.1, that person or entity shall register in each of those categories in accordance with the procedures in clause 2.5. 

2.2.4      WESM Members 

2.2.4.1      AWESM Memberis person or an entity registered with the Market Operator in any one or more of the above categories, whether registered as a Direct WESM Member or an Indirect WESM Member, if applicable. 

2.2.4.2      No person or entity shall be allowed to inject or withdraw electricity from the gridunless that entity or person is a registered member of the WESM. 2.2.4.3. 

2.2.4.3      AnIntending Participant is not considered to be a WESM Member.  

2.3      CATEGORIES OF WESM MEMBER 

2.3.1 Generation Company 

2.3.1.1 A Generation Companywith facilities connected to a transmissionor distribution system shall register with the Market Operator as a WESM Member. 

2.3.1.2 To register as a WESM Member, a Generation Company  shall: 

(a)           Classify each of the generating unitswhich form part of the generating systemit owns, operates or controls or from which it otherwise sources electricity as either: 

(1)       Ascheduled generating unit; or 

(2)       Anon-scheduled generating unit; or 

(3)       Anew and renewable energy (NRE) generating unit with intermittent energy resource; 

(b)           Satisfy the Market Operatorthat those generating units and the connection pointsfor those generating unitscomply with the relevant technical requirements set out in the WESM Rules, the Grid Code andDistribution Code;and 

(c)           Satisfy the membership criteria specified in clause 2.3.3.4. 

2.3.1.3 A generating unitor a group of generating units connectedat a common connection pointwith a nameplate rating or a combined nameplate rating of greater than or one tenth of one percent (> 0.1%) of the peak load in a particular reserve regionshall be classified as a scheduled generating unit.

2.3.1.4 A generating unitor a group of generating units connectedat a common connection pointwith a nameplate rating and a combined nameplate rating of less than one tenth of one percent (< 0.1%) of the peak load in a particular reserve region, or less than ten percent (< 10%) of the size of interconnection facilities, whichever is lower, shall be classified as a non-scheduled generating unit, but may at its option be classified as a scheduled generating unit.

2.3.1.5 A generating unitor group of generating units connected at a common connection pointwhose energy resource is location specific and has a natural variability which renders the output unpredictable and the availability of the resource inherently uncontrollable shall be classified as an NRE generating unit with intermittent energy resource, but may at its option be classified as a scheduled generating unit.

2.3.1.6 A Generation Company is taken to be a Scheduled Generation Companyonly so far as its activities relate to any scheduled generating unit. 

2.3.1.7 A Scheduled Generation Company is required to operate any scheduled generating unitin accordance with the scheduling and dispatch proceduresdescribed in chapter 3, within the dispatch tolerances specified in accordance with clause 2.3.3.5. 

2.3.2 Customer 

2.3.2.1 A person or an entity that engages in the activity of purchasing electricity supplied through the transmission system or a distribution system to a connection point may register with the Market Operatoras a Customer. 

2.3.2.2 To register as a Customer, a person or an entity shall satisfy the membership criteria specified in clause 2.3.3.4. 

2.3.2.3 A Customer shall comply with the scheduling and dispatch proceduresdescribed in chapter 3. 

2.3.3 Trading Participant 

2.3.3.1 A Trading Participant is a person or an entity registered with the Market Operator as either: 

(a)           A Customer; or 

(b)           A Generation Company,

and may be registered either as a Direct WESM Memberor an Indirect WESM Memberin respect of its activities relating to trading in the spot marketsubject to compliance with the relevant prerequisites set out in clauses 2.3 and 2.4. 

2.3.3.2 Subject to clauses 2.3.3.3 and 2.3.3.4, a Trading Participant registered as a Direct WESM Member is permitted to participate in the spot market for each category in which that Trading Participant is registered. 

2.3.3.3 A person or an entity shall not undertake activities or participate in or in relation to the spot market unless the person or entity is a Direct WESM Memberregistered as a Customeror Generation Companywith the Market Operator. 

2.3.3.4 Membership Criteria 

A person or an entity is not eligible to be registered as a Trading Participant unless that person or entity: 

(a)           Is a resident in, or is permanently established in, the Philippines; 

(b)           Is not under external administration (as defined in the [Philippines Companies Act/Code]) or under a similar form of administration under any laws applicable to that person or entity in any jurisdiction; 

(c)           Is not immune from suit in respect of the obligations of a WESM Memberunder the WESM Rules;  

(d)           Is capable of being sued in its own name in a court of the Philippines; and 

(e)           Satisfies the prudential requirements. 

2.3.3.5 Prior to registration of a Trading Participant in respect of a scheduled generation unit or scheduled loadfacility, an Intending WESM Member may seek a ruling from the System Operator with respect to the dispatch tolerancesto be applied. 

2.3.3.6 If no prior ruling is sought under clause 2.3.3.5, the System Operatorshall make a ruling with respect to dispatch tolerancesupon registration of that Trading Participant. 

2.3.3.7 The System Operator may, at any time, review any ruling made under clause 2.3.3.5 or 2.3.3.6 in the light of further information or experience. 

2.3.3.8 A Scheduled Generation Company may appeal to the PEM Boardin respect of a ruling provided under this section that is relevant to that person or entity. 

2.3.3.9 If at any time a Trading Participantceases to be eligible to be registered as a Trading Participant in accordance with clause 2.3.3.4, that Trading Participant shall inform theMarket Operator accordingly and, as soon as practicable after theMarket Operator becomes aware that a Trading Participant is no longer eligible to be registered, theMarket Operator shall issue a suspension notice in respect of that Trading Participantin accordance with clause 3.15.7. 

2.3.4 Network Service Provider 

2.3.4.1 The TRANSCO or the Grid Owner as defined in theGrid Codeshall register with the Market Operatoras a Network Service Provider. 

2.3.4.2 A Distribution Utilityshall register with the Market Operatoras a Network Service Provider. 

2.3.5 Ancillary Services Provider 

2.3.5.1 A Trading Participantor Network Service Providerproviding ancillary servicesin accordance with clause 3.3: 

(a)        Shall register with the Market Operator as an Ancillary Services Provider in respect of: 

(1)   Eachreserve facility it operates; 

(2)   Eachreserve category it intends to provide from the reserve facilitiesregistered under clause 2.3.5.1 (a)(1) and as authorized by the System Operatorunder clause 2.3.5.3; and

(3)   Thereserve facility category applicable to the reserves intended to be provided by each of the reserve facilitiesregistered under clause 2.3.5.1 (a)(1) and as authorized by the System Operatorunder clause 2.3.5.3. 

(b)        May be registered either as a Direct WESM Memberor an Indirect WESM Memberin respect of its activities relating to the provision of ancillary services, subject to satisfying the relevant prerequisites set out in clause 2.3. 

2.3.5.2 Only an Ancillary Services Providerregistered as a Direct WESM Membermay enter into an ancillary services agreementwith the System Operatorunder clause 3.3.3. 

2.3.5.3 Prior to the registration of aTrading Participant or a Network Services Provideras an Ancillary Services Provider eligible to provide reserves in accordance with clause 2.3.5.1, the System Operator shall:

(a)           Certify that the relevant reserve facility is capable of providing the reserve category for which registration is sought, in accordance with the Grid CodeandDistribution Code; 

(b)           Classify each reserve facility for which registration is sought into a reserve facility categoryin respect of each reserve categorythat is intended to be provided by that reserve facility; 

(c)           Determine to which reserve region each reserve facility for which registration is sought may belong, depending on the ability of that reserve facility to apply reserve to meet the corresponding locationally specific reserverequirement; and 

(d)           Provide written authorization to the Market Operator which sets out the relevant information determined under clauses 2.3.5.3 (a), (b) and (c). 

2.3.5.4 A Trading Participant and a Network Services Provider shall not be paid or compensated for providing ancillary services or reserves unless:  

(a)           Registered as an Ancillary Services Providerin respect of the relevant facility in accordance with clause 2.3.5.1; or 

(b)           Registered as an Ancillary Services Provider for provision of the relevant reserve category in that relevant reserve region in accordance with clause 2.3.5.1. 

2.3.6 Metering Services Provider 

2.3.6.1 A person or an entity intending to provide metering services in accordance with chapter 4 shall secure an authorization from the ERC.

2.3.6.2 A person or an entity authorized by the ERCto provide meteringservices shall register with the Market Operator as a Metering Services Provider. 

2.3.6.3 Initially, the TRANSCOshall provide the services required of the Metering Services Provider, but this will not exclude other entities from doing the same, provided they meet the requirements of chapter 4.

2.3.7 System Operator 

The System Operator of the TRANSCO shall register with the Market Operator as a System Operator. 

            2.4      INDIRECT WESM MEMBERS 

A person or an entity who wishes to indirectly trade in the spot market shall register with the Market Operatoras an Indirect WESM Member.  However, an Indirect WESM Membermay only transact through a direct WESM Member. 

            2.5      APPLICATIONS FOR REGISTRATION 

2.5.1 Application process 

An application for registration shall be submitted to theMarket Operator in the form prescribed by theMarket Operator and shall be accompanied by a registration fee publishedby theMarket Operator. 

2.5.2 Prerequisites for applicants 

If an applicant applies for registration either as a Direct WESM Member or as an Indirect WESM Member that applicant shall: 

(a)             Have an appropriate and current authorizationrequired under the Act; and 

(b)             Satisfy the relevant requirements of clause 2.3, for Direct WESM Members. 

2.5.3 Further information to assess application 

2.5.3.1 Within five business days of receiving an application, theMarket Operator shall advise the applicant of any further information which theMarket Operator reasonably considers to be required to enable theMarket Operatorto properly assess the application.  

2.5.3.2 If theMarket Operator has not received any further information as required under clause 2.5.3.1 within the next fifteen business days, theMarket Operator may treat the application as withdrawn.  

2.5.3.3 If theMarket Operator incurs additional costs as a result of requesting and assessing any further information required under clause 2.5.3.1, theMarket Operator may require the applicant to pay the actual amount incurred to cover those additional costs. 

2.5.4 Approval of applications 

If an application for registration has been received by theMarket Operatorand: 

(a)       All relevant prerequisites have been satisfied; 

(b)       The applicant is eligible to be registered in the category or categories in which registration is sought; and 

(c)       TheMarket Operator reasonably considers that the applicant will be able to comply and maintain compliance with the WESM Rules, 

then subject to clause 2.5.5, theMarket Operator shall approve the application and register the applicant in that category or categories. 

2.5.5 Notice of approval of application 

2.5.5.1 If theMarket Operator approves an application under clause 2.5.4, theMarket Operator shall send written notice of approval to the applicant within fifteen business days from receiptof:

(a)           The application under clause 2.5.1; or 

(b)           The additional information or fees, if further information or fees are required under clause 2.5.3.  

2.5.5.2 The registration of the applicant shall take effect on the date specified in the notice of approval which shall be a date not more than seven days after the date on which the Market Operator sends the notice of approval under clause 2.5.5.1. 

2.5.6 Notice of non-approval of application

2.5.6.1       If theMarket Operator does not approve an application for registration in a category to which an application relates, theMarket Operator shall send within fifteen (15) business days written notice to the applicant advising the applicant that the application is not approved and theMarket Operator shall give reasons for its decision.  

2.5.6.2       The ERC shall be provided a copy of such written notice within five 

(5) business days after issuance to the applicant. 

2.5.6.3 If an application for registration is rejected by the Market Operatorunder clause 2.5.6.1 an applicant may: 

(a)           Rectify the shortcomings in his previous application as notified by the Market Operatoras being the reasons for the application being unsuccessful and re-submit an application for registration; or 

(b)           Refer the matter for resolution as a dispute under clause 7.3. 

2.5.7 Market Operator to maintain a list 

The Market Operator shallpublish and keep current a list of registered WESM Members,the categories in which they are registered and details of the current status of applications to become a WESM Memberin accordance with clause 5.2.3. 

            2.6      CEASING TO BE A WESM MEMBER 

2.6.1 Notifying the Market Operator 

If a person or an entity wishes to cease to be registered: 

(a)         In any one or more categories of WESM Member set out in clause 2.3; or 

(b)         As an Indirect WESM Member,  it shall notify theMarket Operatorin writing. 

2.6.2 Date of cessation 

In a notice given under clause 2.6.1, a WESM Member shall specify: 

(a)   A date upon which it wishes to cease to be registered, which date should not be less than thirty (30) business days after the date on which the WESM Member sends the notice; and 

(b)   The category or categories in which the WESM Membersno longer wishes to be registered. 

2.6.3 Notifying all WESM Members 

On receipt of a notice under clause 2.6.1, theMarket Operatorshall notify all WESM Members that the person or entity who gave the notice shall cease to be registered as a WESM Memberin the relevant category and the date on which that will occur. 

2.6.4 Market Operator notification of cessation 

If the Market Operator provides notice under clause 2.6.3 that a WESM Member shall cease to be registered in the relevant category on a specified date, that WESM Member shall cease all activities relevant to that category that it was permitted to undertake before it ceased to be registered as a WESM Memberin that relevant category, including but not limited to trading in the spot marketif that WESM Memberceases to be registered as aTrading Participant, from that date. 

2.7      SUSPENSION 

2.7.1 Grounds for Suspension  

The Market Operator may issue a suspension notice to WESM Participantsbased on the following grounds: 

(a)     Breach of the WESM Rulessubject to clause 7.2.2; and 

(b)     Payment default subject to 3.14.11.  

2.7.2 Effect of a suspension notice 

If a Trading Participant who is either a Direct WESM Member or an 

Indirect WESM Member receives a suspension notice from theMarket 

Operatorin accordance with any provision of the WESM Rules, that TradingParticipant is suspended from participation in the spot market unless and until the Market Operator declares the suspension notice to be revoked in accordance with clause 3.15.7. 

2.8      DEREGISTRATION  

2.8.1 Deregistration of a Trading Participant 

2.8.1.1 If the Market Operator issues a deregistration notice to any Trading Participant under the deregistration process, the Trading Participantis deemed to be deregistered as a Trading Participant from the date specified in the deregistration notice. 

2.8.1.2 A Trading Participant who is deregistered shall not be allowed to reregister within a certain prescriptive period and until it has demonstrated that such infraction will not occur again. 

2.8.2 Obligations and liabilities following deregistration 

Notwithstanding that a person or an entity is no longer registered as a WESM Memberfor any reason including ceasing to be a WESM Member or being suspendedfrom the spot market, that person’s or entity’s obligations and liabilities which arose under the WESM Rules prior to the date on which that person or entity was deregistered remain unaffected by the deregistration. 

2.8.3 Deregistration procedure development 

Prior to spot market commencement date, the Market Operatorshall develop procedures for deregistration including grounds for deregistration and prescriptive period referred to in clause 2.8.1.2 to be approved by the PEM Board. 

            2.9      INTENDING WESM MEMBERS  

                      2.9.1 Registration as an Intending WESM Member 

Any person or entity who intends to register as a WESM Member may register with theMarket Operator as an Intending WESM Memberif that person or entity can satisfy theMarket Operator of its bona fide intent to commence an activity, within a reasonable timeframe, which would entitle or require that person or entity to be registered as a WESM Memberonce that activity is commenced. 

                       2.9.2 Applications for registration 

Applications for registration as an Intending WESM Member shall be submitted to theMarket Operator in the form prescribed by theMarket Operator and shall be accompanied by the registration fee (if any) published by theMarket Operator from time to time. 

                       2.9.3    Notice of cessation of registration 

TheMarket Operator may from time to time require an Intending WESM Member to satisfy theMarket Operatorthat it continues to meet the criteria for registration in clause 2.9.1 and if the Intending WESM Memberis unable to satisfy theMarket Operator that it remains entitled to be registered as an Intending WESM Member, then theMarket Operatorshall send written notice to the relevant Intending WESM Member to advise the relevant Intending WESM Member that it will cease to be registered as an Intending WESM Memberon the date specified by theMarket Operator in that notice. 

                       2.9.4    Activities of Intending WESM Members 

An Intending WESM Member is taken to be an Intending WESM Member only insofar as its activities relate to its intention to commence an activity that would entitle or require that person or entity to be registered as a WESM Member. 

                       2.9.5    Rights and obligations of Intending WESM Members 

To the extent relevant and applicable, an Intending WESM Member acquires only the following rights and obligations under the WESM Rules: 

(a)         The right to obtain information that would be made accessible to WESM Membersin the category in which the Intending WESM Memberintends to be registered;  

(b)         The right to refer matters for resolution according to the dispute resolution process in clause 7.3; and 

(c)         The obligation to keep certain information confidential in accordance with clause 5.3. 

2.10 MARKET FEES 

2.10.1 Imposing Market Fees 

The cost of administering and operating the WESMshall be recovered by the Market Operatorthrough a charge imposed on all WESM Membersor WESMtransactions, provided such charge shall be filed by the Market Operatorwiththe ERC for approval, consistent with the Act. 

         2.10.2    Structure and Level of Market Fees 

2.10.2.1 Prior to the commencement of the spot market, the Market Operator shall develop the structure and level of market fees in consultation with WESM Participants. 

2.10.2.2 In developing the structure and level of market fees, the Market Operator shall take into consideration the manner in which itintends to charge each category of WESM Member, and whether that charging proposal is reasonable given the relative involvement of each category of WESM Memberin the spot market. 

2.10.2.3 Upon the approval of the PEM Board, the Market Operatorshall file the proposed structure and level of market fees with the ERCfor approval.

         2.10.3    Guiding Principles  

The structure of market fees should, to the extent practicable, be consistent with the following principles: 

(a)         The structure of market fees should be transparent; 

(b)         Market fees shall consider the budgeted revenue requirements for the Market Operatorand the PEM Board determined under clause 2.11; and 

(c)         The structure and level of market fees should not favor or discriminate against a category or categories of WESM Member. 

2.10.4 Components of Market Fees 

The components of the market fees shall include, but are not limited to: 

(a)         Registration fees, comprising an annual fee payable by each WESM Member for the category or categories in which they are registered; 

(b)         Metering feesto recover the Market Operator’s budgeted revenue requirements for the collection, storage and processing of metering data; 

(c)         Billing and settlementfees, to recover the Market Operator’sbudgeted revenue requirements for providing the billing and settlements service, as described in chapter 3;  

(d)         Administration fees, to recover the remainder of the Market Operator’s budgeted revenue requirements not covered by (a), (b), (c) and (d); and 

(e)         Costs reasonably incurred by the PEM Boardand the committees and working groups that the PEM Boardappoints under the WESM Rules.  

2.10.5 Publication of Market Fees Structure

Upon the approval of ERC, the Market Operatorshall publish the structure and level of market feesand the methods used in determining the structure prior to commencement of the spot market. 

2.11 BUDGET 

2.11.1 Submission of annual statements and other documents 

2.11.1.1 No later than four months prior to the start of each financial year, the Market Operator shall submit an annual statement of expected income and expenses to the PEM Board for approval, setting out, among others, the following: 

(a)           Budgeted expenditures and revenues for the next financial year for the Market Operatorand the PEM Board;  

(b)           Amount of market feesproposed to be charged for the next financial year; and 

(c)           Method used in determining the amount of proposed market feesin respect of each of the Market Operator’s activities and the PEM Board’s activities referred to in clause 2.10.4 including but not limited to theMarket Operator’s estimated costs and expenses associated with those activities. 

2.11.1.2 The Market Operator shall submit to the ERCa copy of the annual statement approved by the PEM Board under clause 2.11.1.1. 

2.12 FINANCIAL YEAR REPORT 

2.12.1 Market Operator to prepare report 

2.12.1.1 No later than four months after the end of each financial year, the Market Operator shall prepare an annual report, setting out, among others, the following: 

(a)           Thebudgeted and actual expenditures and revenues of the Market Operator and the PEM Board, clearly categorizing each group of expenses and revenues into the key functions and activities undertaken by the Market Operator and the PEM Board; and 

(b)           An explanation of any significant variation between budgeted and actual expenditures and revenues, in respect of the previous financial year. 

2.12.1.2 The annual report prepared under clause 2.12.1.1 shall be duly certified by an independent auditor and approved by the PEM Board. 

2.12.2 Providing copy of report 

The Market Operator shall provide a copy of the annual report prepared under clause 2.12.1 to: 

(a) The ERCand the DOE on completion of the report; (b) The PEM Board; and 

(c) WESM Members and interested entitieson request. 

CHAPTER 3 

^{_{THE MARKET}} 

            3.1      SCOPE OF CHAPTER 3 

This chapter 3 sets out the rules which govern operation of the spot market, and related matters,including but not limited to: 

(a)  The definition of the market network model,pricing zones, reserve categories and reserve regions, trading intervaland timetable; 

(b)  The procedures to be followed by WESM Membersin submitting offers, demand bidsand data into the spot market; 

(c)   The structure and use of the market dispatch optimization model; 

(d)  The procedures for provision of ancillary services and for determining payment for those services; 

(e)  The procedures for preparing week ahead projections and day ahead projections;  

(f)    The procedures for scheduling anddispatch, load shedding andexcess generation; 

(g)  The determination of market prices; 

(h)  The requirement relating to the publicationof information, in accordance with the timetable;

(i)    The procedures for determining settlements amounts and for paying and receiving settlements;

(j)    The determination of prudential requirements; and 

(k)   The procedures for supporting transmission rights. 

3.2 MARKET NETWORK MODEL, TRADING NODES, AND PRICING ZONES 

The price determination methodologycontained in this WESM Rulesshall be subject to the approval of ERC. 

3.2.1 Market Network Model   

3.2.1.1 The Market Operatorshall maintain and publish a market network model, which will be used for the purpose of central scheduling and dispatch, pricing and settlement. 

3.2.1.2 The market network modelshall represent fairly, and in a manner which will facilitate consistent and reliable operation of the power system: 

(a)  Thetransmission networkunder the control of the System Operator, and 

(b)  Such other aspects of the power system which, when connected, may be capable of materially affecting dispatchof scheduled generating unitsor pricing within the spot market.  

3.2.1.3 The market network modelmay contain such simplifications, approximations, equivalencies or adaptations as may facilitate the dispatch, pricing, or settlement processes.   

3.2.1.4 Where appropriate, the Market Operator or the System Operator may recommend alterations to the market network model, so as to maintain: 

(a)   The relationship between the market network model and the transmission network; and  

(b)   Consistency with marketrequirements,  in accordance with clauses 3.2.1.2 and 3.2.1.3. 

3.2.1.5 Any alteration recommended under clause 3.2.1.4 shall be approved by the PEM Board.  

3.2.1.6 The Market Operatorshall continuously adapt or adjust the representation of the market network modelto accurately reflect power systemconditions, within the relevant markettime frames, as advised by the System Operatorunder clause 3.5.3. 

3.2.2 Market Trading Nodes 

3.2.2.1 A market trading node shall be defined for each nodein the market network model that lies at the boundary between a networkoperated by the System Operator and any apparatus, networkor equipment used to generate, convey or control the conveyance of energy and operated by a person other than the System Operator.  

3.2.2.2 Each market trading nodedefined under clause 3.2.2.1 shall: 

(a)   Represent a metering installationcapable of measuring all relevant flows of energyinto, or out of, the power systemoperated by the System Operator at that market trading node;  

(b)   Be associated with a Trading Participantwho is required to pay, or who shall be paid, for that meteredquantity of energy, or any adjusted quantity calculated in accordance with clause 3.13.7, 

and shall be classified either as: 

(c)   Agenerator node if the noderepresents a registered generating unitor generating system directly connectedto a networkoperated by the System Operator at that market trading node; or  (d) Acustomer node. 

3.2.2.3 If a nodein the market network model for which settlementis required lies at the interface between two networks, or pieces of apparatus or equipment, used to generate, convey or control the conveyance of energy and both are operated by persons other than the System Operator then a pair or pairs of market trading nodes shall be defined for that node and: 

(a)   Each pair of market trading nodes shall represent a meteringinstallationcapable of measuring all relevant flows of energybetween the relevant networks, apparatus or equipment at that market network node;  

(b)   One node from this pair of market trading nodes shall be classified as agenerator nodeand the other as a  customer nodedepending on the normal direction of energyflow, prior to any adjustment for bilaterals under clause 3.13.7; and 

(c)   Each of those market trading nodesshall be associated with a Trading Participantwho is required to pay, or who shall be paid, for that metered quantityof energy, or any adjusted quantity calculated in accordance with clause 3.13.7.  

3.2.2.4 The Market Operatorshall maintain, publish, and continuously update a register of market trading nodes, defined in accordance with clause 3.2.2.1 so as to accurately reflect changes in the market network modeland the WESM Member responsible for each market trading node.  

3.2.3 Customer Pricing Zones 

3.2.3.1 The Market Operatorshall maintain and publishthe customer pricing zonesto be used for the settlement of energy for Customers.

3.2.3.2 Customer nodes may be grouped into a customer pricing zone. All Customers within a customer pricing zoneshall face the same price for electricity consumed. 

3.2.3.3 As long as customer pricing zonesare employed, theMarket Operatorshall conduct a periodic review and evaluation of existing customerpricing zones, and shall: 

(a)           Submit revised customerpricing zones, to the PEM Board for approval; and 

(b)           Publishany revised customer pricing zonesapproved by the PEM Board. 

3.2.3.4 The Market Operator shall, in consultation with WESM Participants, continuously review the procedures for determining the market network model,market trading nodes, and customer pricing zonesset out in this chapter 3 and, to the extent the Market Operatorconsiders it to be reasonably necessary to promote the WESM objectives, the Market Operatormay recommend changes to these procedures in accordance with the rule change process set out in chapter 8. 

3.3       ANCILLARY SERVICES 

3.3.1 Introduction 

3.3.1.1 Ancillary services are services that are essential to the management of power system security, that facilitate orderly trading in electricity and ensure that electricity supplies are of an acceptable quality. 

3.3.1.2 Without limitation, ancillary servicesmay include 

(a)           The provision of sufficient regulating reserve to meet fluctuations in load occurring within a trading interval; 

(b)           The provision of sufficient contingency reserve to maintain power system frequency; 

(c)           The provision of dispatchable reserveavailable to respond to a re-dispatch performed during a trading interval, on either a regular or an ad hoc basis; 

(d)           The provision of reactive support to guard against power system failure; and 

(e)           The provision of black start capability to allow restoration of power system operation after a complete failure of the power system or part of the power system. 

3.3.1.3 The requirements for ancillary services are to be met in the following ways: 

(a)           By the System Operator, in consultation with the Market Operator and WESM Participants, setting minimum standards in relation to technical performance specified in theGrid Codeand Distribution Codewhich requires some level of ancillary services to be provided by Ancillary Services Providers; 

(b)           By the System Operator purchasing ancillary servicesin accordance with clause 3.3.3. 

3.3.2 Ancillary Services Contracting by the System Operator 

3.3.2.1 The System Operator shall use reasonable endeavors to ensure that sufficient facilities are available and operable to provide for: 

(a)           The maintenance or restoration of power system security under emergency conditions; 

(b)           The restoration of all or any part of the power system to its satisfactory operating state, following an emergency, threat to system securityor force majeure event; and 

(c)           The availability, at all times, of the number of independent power sources able to provide black start-up facilities, determined in accordance with the procedures developed by the Market Operatorto ascertain the quantities of ancillary services which the System Operator shall purchase. 

3.3.2.2 The System Operator shall use reasonable endeavors to enter into ancillary services agreements to provide sufficient ancillary services to meet the requirements of clause 3.3.2.1, subject to clause 3.3.3. 

3.3.3 Ancillary Services Agreements 

3.3.3.1 The System Operatorshall arrange for the provision of adequate reservesfor each region in accordance with clause 3.3.3.2.   

3.3.3.2 The System Operator shall arrange for the provision of adequate ancillary services for each regioneither:

(a)           By competitive tendering process, administered by the Market Operator, whereby a number of Ancillary Services Providerscan provide a particular category of ancillary services; or 

(b)           By negotiating contracts directly with an Ancillary Services Providerwho is a Direct WESM Member, where only one Ancillary Services Providercan provide the required ancillary services; or 

(c)           Where applicable, by competitive spot markettrading in accordance with clause 3.3.4. 

3.3.3.3 The System Operator shall negotiate any ancillary services agreements with Ancillary Services Providers who are Direct WESM Members on commercial terms acceptable to the parties and at arms length, subject to clause 3.3.3.2. 

3.3.3.4 Payment for ancillary services purchased under an ancillary services agreement may include: 

(a)           A payment for both contracted capabilities and a measure of the ancillary servicesprovided; 

(b)           A demonstrable spot market opportunity cost, that is lost spot market revenue or opportunity costs incurred by the Ancillary Services Provideras a result of providing the ancillary services; 

(c)           A fair return to the Ancillary Services Provider in respect of any additional direct costs associated with providing the ancillary service;  

(d)           When applicable, subject to clause 3.3.4.1, a price for that ancillary serviceestablished by a competitive spot marketmechanism. 

3.3.3.5 Payments for ancillary servicesthat are provided are to be made by the Market Operator via the settlements system in accordance with clause 3.13.14. 

3.3.3.6 Ancillary services agreements shall contain a provision pursuant to which the capability of the relevant Ancillary Services Provider to provide ancillary services shall be demonstrated from time to time to the satisfaction of theSystem Operator according to the standard test procedures established under the Grid Codeand Distribution Code. 

3.3.3.7 Any dispute between the System Operator and the Ancillary Services Provider in relation to the determination of a payment under an ancillary services agreement shall be determined by the Dispute Resolution Administratorin accordance with clause 7.3. 

3.3.4 Reserve Market Arrangements 

3.3.4.1 When reasonably feasible, the Market Operator, in coordination with the System Operator, shall establish and administer a spot market for the purchase of certain reserve categories.  

3.3.4.2 The reservecategories to be traded in the spot marketshall include: 

(a)           Regulating reserve, being the ability to respond to small fluctuations in system frequency including but not limited to fluctuations caused by load fluctuations;  

(b)           Contingency reserve,being the ability to respond to a significant decrease in system frequency including but not limited to a decrease in system frequency in an interconnected AC network as a result of a credible contingency affecting one (or more) Generation Companies within that network, or transmission flows into that network;and 

(c)           Such other reserve categories as may from time to time be proposed by the Market Operator, in consultation with the System Operator, and with WESM Members, and approved by the PEM Board. 

3.3.5 Ancillary Services Cost Recovery 

3.3.5.1 The System Operator shall maintain and publish reserve cost recovery zones within which reserve cost recovery charges may be recovered to meet each locationally specific requirement. 

3.3.5.2 The costs of ancillary services are to be recovered through the settlement amounts calculated by the Market Operator under clause 3.13.10: 

(a)           In accordance with the cost recovery formula to be developed by the System Operator for the categories of reserve which are defined in clause 3.3.4.2; and 

(b)           From those WESM Members or others on whose behalf the System Operator is deemed to purchase each ancillary service, in proportion to the benefits which are considered to be derived by those WESM Members, in respect of ancillary services not included in clause 3.3.5.2 (a). 

3.3.5.3 The costs of providing each locationally specific reserverequirement shall be allocated by the Market Operatorto those Trading Participantsin the relevant reservecost recovery zone  in the form of reserve cost recovery charges to be determined in accordance with the principles set out in clause 3.3.5.4. 

3.3.5.4 When allocating reserve cost recovery chargesto Trading Participants in a particular reserve cost recovery zone as published in clause 3.3.5.1 the Market Operator may recover: 

(a)           The cost of regulating reserve, in each reserve cost recovery zone, from: 

(1)   Customers with load facilities connected in that reserve cost recovery zone, under a formula which shall account for both the relative size of the customer loads, and the degree to which they contribute to deviations from their schedule within the trading interval; and 

(2)   Scheduled Generation Companies with generating systems connected in that reserve cost recovery zone under a formula which shall account for both the relative size of the generating systems, and the degree to which they deviate from dispatch instructions, 

(b)           The cost of contingency reserve, in each reserve cost recovery zone, from: 

(1)   Generation Companies with generating systems connected in that reserve cost recovery zone; and 

(2)   Network Service Providers serving that reserve cost recovery zone,  

under a formula which accounts for the relative size of the relevant generating system and distribution network, their reliability, and the impact which failure may have on conditions within that reserve cost recovery zone. 

3.3.6 Provision of Ancillary Services 

3.3.6.1    AnAncillary Services Provider shall not unreasonably refuse to provide ancillary services.  

3.3.6.2    When justifiable in terms of power system security, the System Operatormay direct any Ancillary Services Provider to provide an ancillary service in accordance with the Grid Code.   

3.3.7 Approval,          Periodic          Review           and     Evaluation     of        Ancillary         Service Arrangements 

3.3.7.1    TheSystem Operatorof TRANSCOshall charge user fees for ancillary servicesto all electric power industry participants or self-generating entities connected to the grid.  Such fees shall be fixed by the ERCafter due notice and public hearing.

3.3.7.2    TheSystem Operator, in consultation with Market Operator and WESM Participants shall conduct a periodic review and evaluation of the following: 

(a)           Ancillary servicescategories, ancillary services arrangements and ancillary services cost recovery formula; 

(b)           Reserve categories, reserve regions,and locationally specific reserve  requirements; and 

(c)           Procedures developed under this clause 3.3 with a view to refining these procedures to promote the WESM objectives and better meet the requirements of the power system operation. 

3.3.7.3 Any proposed changes to the ancillary service categories, ancillary services arrangements, ancillary services cost recovery formula,reserve categories, reserve regions or locationally specificreserve requirements that will affect the fees of ancillary servicesshall be filed by the System Operatorof TRANSCO with the ERC for approval. 

3.3.7.4 The System Operatorshall continuously adjust the reserve effectiveness factors for each reserve facility category, and the quantum of reserve to be scheduled to meet each locationally specific reserve requirement by the market dispatch optimization model, so as to accurately reflect the power systemunder existing or future conditions, within the relevant markettime frames, as advised by the System Operatorunder clause 3.5.3.1. 

3.3.7.5 Any proposed changes in the procedures reviewed under this clause 3.3.7 shall be approved by the PEM Boardin accordance with the rule change process set out in chapter 8. 

3.4      MARKET TRADING INTERVAL AND TIMETABLE 

            3.4.1     Trading Intervals 

3.4.1.1 For the purpose of trading in energy and ancillary services, a trading interval is one (1) hour, commencing on the hour.   

3.4.1.2 Only energyshall be traded during the interim WESM.  Trading in ancillary services shall be implemented upon commencement of the spot marketfor ancillary servicesestablished under clause 3.3.4. 

                        3.4.2    Timetable 

3.4.2.1 The Market Operatorshall operate the spot market in accordance with the timetable. 

3.4.2.2 The timetable shall include the schedule and procedure for the following:  

(a)           Determining and publishing week ahead projectionsincluding precise specification of the market horizonto be used for such projections;  

(b)           Determining and publishing day ahead projectionsincluding precise specification of the market horizon to be used for such projections;  

(c)           Submitting offers, bids and data; and 

(d)           If necessary, for any other action to be taken by the Market Operator, the System Operator,or any WESM Member during the operation of the spot market.

3.4.2.3 The Market Operator shall maintain, publishand continuously update the timetable.

3.4.2.4 Any proposed changes in the timetable and related procedures shall be approved by the PEM Boardin accordance with the rule change process set out in chapter 8. 

            3.5      SUBMISSION OF OFFERS, BIDS, AND DATA 

3.5.1 Communications of Offers and Bids 

Each Trading Participant shall provide to the Market Operator the information required under this clause 3.5 in accordance with the electronic communication procedures.

3.5.2 Network Service Provider Data 

3.5.2.1 Each Network Service Provider shall submit to the System Operator standing network data relating to all network elements which are under that Network Service Provider’s control and included in the market network model, in accordance with clause 3.5.2.4 and the Grid Code and Distribution Code.  

3.5.2.2 If there is any material long term change in the status or configuration of a networkunder the control of a Network Services Provider, thestanding network datarelevant to that networkshall be revised by the relevant Network Service Provider, and submitted to the System Operator. 

3.5.2.3 Each Network Service Provider shall submit period-specific networkdata variations to the System Operatoras soon as any material change in previously submitted network data becomes apparent with respect to the expected state of any of its networksin any trading interval of any trading dayin the current week-ahead market horizon. 

3.5.2.4 The standing network dataand any variations to that data submitted in accordance with clause 3.5.2.3 shall be provided by Network Service Providers in a form which allows the System Operatorto readily derive and verify the information specified in Appendix A2, as it may pertain to any trading interval of any trading dayin the week-ahead market horizon. 

3.5.2.5 Each Network Service Provider shall immediately advise the System Operatorof any circumstances which threaten a significant probability of material adverse change in the state of its networkin any trading interval of any trading dayin the current week-ahead market horizon

3.5.3 System OperatorData 

3.5.3.1 The System Operatorshall submit to the Market Operatorstanding network data relating to all network elements which are under the Network Service Provider’s control and included in the market network model, in accordance with the timetable. 

3.5.3.2 Where necessary, the System Operator shall, in accordance with the timetable, promptly advise the MarketOperatorto: 

(a)        Vary the market network modelrepresentation employed for any trading intervalin the current week-ahead market horizonto take account of information received from Network Service Providers; and 

(b)        Apply, or vary, any system securityconstraints, over-riding constraints or reserve requirements constraints to be applied in any trading intervalin the current week-ahead market horizonto take account of current, or projected, system conditions.

3.5.3.3 In determining whether it is reasonably necessary to advise the Market Operatorunder clause 3.5.3.2, the System Operatorshall take into consideration its obligations with respect to maintaining system securityin accordance with the WESM Rules, the Act, the Grid Code and Distribution Code, or any other relevant regulatory instruments. 

3.5.3.4 In acting on such advice, the Market Operatorshall take full account of its obligations to WESM Memberswith respect to maintaining the integrity of the market, and the market network model, as defined by the WESM Rules, the Act, or any other applicable regulatory instruments. 

3.5.3.5 In accordance with the timetable,any revision under clause 3.5.3.2 to the system representation or constraints to be employed with respect to any market trading intervalshall take effect the next time a market dispatchoptimization model run is initiated. 

3.5.3.6 The System Operator shall advise the Market Operatorof any circumstances which threaten a significant probability of material adverse change in the state of the network, or system, in any trading interval of any trading dayin the current week-ahead market horizon.

3.5.4 Load Forecasting 

3.5.4.1 The Market Operatorshall prepare the net load forecasts  for each market trading node at which load can be expected to occur. 

3.5.4.2 Each net load forecast shall be prepared in such a way as to represent the net loadto be met by scheduled generation, including losses occurring outside the system represented by the market network model, but excluding any scheduled load, and less: 

(a)     Non-scheduled generation, and 

(b)     GenerationfromNRE generating units with intermittent energy resource.

3.5.4.3 The unrestrained net load forecastfor any trading interval shall be prepared so as to represent the net loadas it would be, or would have been, in the absence of load shedding.

3.5.4.4 If load sheddingis expected to occur in any trading interval, a restrained net load forecastfor that trading interval shall be prepared on the same basis, but accounting for load sheddingto the extent that it is expected to occur. 

3.5.5 Generation Offers and Data 

3.5.5.1 Each Scheduled Generation CompanyincludingGeneration Companies with bilateral contracts shall submit a standing generation offer for each of its scheduled generating unitsfor each trading interval in eachtrading dayof the week in accordance with the timetable. 

3.5.5.2 Each generation offer shall include the information specified in Appendix A1.1. 

3.5.5.3 Each Generating Company shall, in consultation with the System Operator, submit check datato be used by the Market Operator, in accordance with clause 3.5.12, to assist in determining the validity of any generationoffer which may be submitted by the Scheduled Generator.  

3.5.5.4 Each Non-ScheduledGeneration Company shall submit a standing schedule ofloading levels for each of its non-scheduled generating units for each trading interval in each trading day of the week in accordance with the timetable.

3.5.5.5 Each NRE Generation Company with intermittent energy resourceshall submit its projected output for each of its generating unitsfor each trading intervalin each trading dayof the week in accordance with the timetable. 

3.5.6 Customer Demand Bids 

3.5.6.1 Each Customermay submit a standing demand bidin respect of each trading intervalfor each of its registered scheduled load facilitiesfor each trading dayof the week in accordance with the timetable.

3.5.6.2 Each demand bid submitted under clause 3.5.6.1 shall: 

(a) Correspond to load which has been certified as dispatchable, in accordance with the Grid Code and Distribution Code; and  (b) Include the information specified in Appendix A1.3. 

3.5.6.3 Each Customer shall, in consultation with the System Operator, submit check datafor each of its registered scheduled load facilitiesto be used by the Market Operator in accordance with clause 3.5.12, to assist in determining the validity of any demand bid which it may submit. 

3.5.7 Generation Company Reserve Offers 

3.5.7.1 This section shall apply only upon commencement of the spot market for ancillary services established under clause 3.3.4. 

3.5.7.2 When applicable, subject to clause 3.3.4.2, each ScheduledGenerator registered as anAncillary Services Provider in respect of a reserve facility in a particularreserve region shall submit a standing reserve offerfor each of its relevant reserve facilities in respect of that reserve region for each trading interval for each dayof the week in accordance with the timetable. 

3.5.7.3 Each reserve offersubmitted by a Generation Company under clause 3.5.7.2shall:

(a) Correspond to response capability of the relevant reserve facility which has been certified as meeting the relevant reserve response standards, for that reserve facility category, in accordance with the Grid Codeand Distribution Code; and  (b) Include the information specified in Appendix A1.2. 

3.5.7.4 Each Generation Companyregistered as an Ancillary Services 

Provider in respect of a reserve facility shall, in consultation with the System Operator, submit check datato be used by the Market Operator, in accordance with clause 3.5.12, to assist in determining the validity of any reserveoffer which it submits.  

3.5.8          Customer Reserve Offers 

3.5.8.1 This section shall apply only upon commencement of the spot marketfor ancillary servicesestablished under clause 3.3.4. 

3.5.8.2 When applicable, subject to clause 3.3.4.2, each Customer registered as an Ancillary Services Provider in respect of a reserve facility in a particular reserve region may submit a standing reserve offer for each of its interruptible load facilities in respect of that reserve region foreach trading interval for each dayof the week in accordance with the timetable.

3.5.8.3 Each reserve offer submitted by a Customerunderclause 3.5.8.2 shall: 

(a)   Correspond to a loadfor that Customer which has been certified as interruptiblein accordance with the Grid Code and Distribution Code; 

(b)   Correspond to the response capability of the relevant reserve facility registered for the provision of interruptible load which has been certified as meeting the relevantreserveresponse standards for that reserve facility category in accordance with the Grid Code and Distribution Code; and 

(c)   Include the information specified in Appendix A2. 

3.5.8.4 Each Customerregistered as an Ancillary Services Provider in respect of a reserve facility shall, in consultation with the System Operator, submit to the Market Operatora check datafor each of its reserve facility, to be used in accordance with clause 3.5.12, to assist in determining the validity of its reserve offer. 

3.5.9 Revision of Standing Offers/Bids 

3.5.9.1 A standing generation offer,a standing reserve offer, a standing schedule of loading levels or a standing demand bid for any trading interval in any dayof the week may be revised by the relevant Generation Companyor Customer in accordance with the timetable. 

3.5.9.2 A standing generation offer, a standing reserve offer, or a standing demand bid which is revised under clause 3.5.9.1: 

(a)           Shall take effect the next time a week ahead projectionis initiated, in accordance with the timetable; and

(b)           Shall only affect the offers employed in market dispatch optimization modelruns used to determine projections, dispatch, or pricingfor periods not already covered by week-ahead projectionswhich have already been published, or whose preparation has already been initiated at the time when the revised offer or bid is accepted. 

3.5.10 Initial setting of Market Offers/Bids 

When the Market Operatorupdates a market projection under clause 3.7, the standing offersand standing bids shall be effective in the absence of revised market offersand market bidsfor the corresponding trading interval and day of the week.   

3.5.11 Revision of Market Offers/Bids 

3.5.11.1 Each scheduled Trading Participant which has submitted standing offersor bidsmay revise any of its marketoffers or market bidsfor any trading interval in any trading dayof the current week-ahead market horizon in accordance with the timetable, and subject to clause 3.5.11.3 and each revised market offeror market bid submitted shall provide the information set out in Appendix A2. 

3.5.11.2 Each Generation Company which has submitted a schedule of loading levels for its non-scheduled generating units shall revise its schedule of loading levels if it reasonably expects that any of its anticipated loading levelswill differ materially from those previously submitted. 

3.5.11.3 In accordance with the timetable,a revised market offer or market bid submitted under clause 3.5.11.1 shall take effect the next time a dispatch, pricingor day-ahead projectionrun is initiated.

3.5.11.4 Market bidsor market offersfor any trading interval shall be revised by Trading Participantsif, at any time, they no longer represent a reasonable estimate of : 

(a)           The expected availability of the relevant generating unitor scheduled loadfor that trading interval; or 

(b)           The demand bidsor offers likely to apply for the real time dispatchoptimization of that trading interval.

3.5.11.5 The Market Operator, in consultation with the System Operatorand WESM Members, and with the approval of the PEM Board, shall determine and publishcriteria to determine the meaning of “reasonable estimate” under clause 3.5.11.4, taking account of: 

(a)           The time remaining until the occurrence of the relevant trading intervalinvolved, 

(b)           The impact on the marketof any variations to offers or demand bids,

(c)           The different categories of WESM Members, and 

(d)           The different circumstances which may have given rise to the need to make the relevant variation. 

3.5.11.6 Trading Participants shall immediately advise the System Operatorand Market Operatorof any circumstances which threaten a significant probability of material adverse change in the state of their facilities in any trading interval of any trading dayin the current week-ahead market horizon. 

3.5.11.7 Prior to the spot market commencement date, the System Operator, in consultation with WESM Members, shall publisha non-exhaustive list of events that will be deemed to be or to cause a material adverse change in circumstances for the purposes of clause 3.5.11.6. 

3.5.11.8 Each market offeror market bid for a particular trading interval is deemed to stand with effect from the time it is initiated under clause 3.5.10 or revised under clause 3.5.11 and will be used in preparing all market forecasts, dispatchtargets or prices for that trading interval, unless and until a valid revision to the market offer is accepted by the Market Operator. 

3.5.12 Confirmation of Receipt of Valid Offers and Bids 

3.5.12.1 To be valid,generation offers,reserve offers or demand bids shall be submitted by the relevant Trading Participant:  (a) In accordance with clause 3.5.1,  

(b)           In accordance with the timetable; and  

(c)           Consistent with the check datasubmitted by the Trading Participantunder clauses 3.5.5.3, 3.5.6.3, and 3.5.7.4 as appropriate. 

3.5.12.2 The Market Operator shall send to each Trading Participant from whom it has received a valid generation offer, reserve offer or valid demand bid, an electronic confirmation of receipt and acceptance of that generation offer, reserve offer or demand bid in accordance with the timetable. 

3.5.12.3 If a Trading Participant does not receive confirmation of receipt under clause 3.5.12.2, from the Market Operatorin accordance with the timetable, the Trading Participant shall contact the Market Operator to determine whether or not the generation offer,reserve offer or demand bidwas received.  

3.5.12.4 If the offer or bid is invalid, the Market Operator shall promptly inform the Trading Participant to resubmit a correctedgeneration offer,reserve offer or demand bid in accordance with clause 3.5.11. 

3.5.13 Over-riding Constraints  

3.5.13.1 Subject to clause 3.5.13.3, the System Operator may recommend to the Market Operator that constraints be imposed on the energy dispatch or reserve dispatch of a specific facility which may have the effect of fixing or bounding the generation or reserve scheduled from that plant,if the System Operator reasonably believes that the generation offer, reserve offer or demand bid does not provide a valid representation of the actual or expected capability of that facility in that trading interval, and where, in the reasonable opinion of the System Operator, such misrepresentation seems likely to impact materially on dispatch or pricing. 

3.5.13.2 In situations where offers are structured in such a way that provision of any level of reserve services prohibits the simultaneous provision of very low or high levels of generation, the System Operator may also recommend to the Market Operator that constraints should be imposed or relaxed so as to allow generating systems to operate in a range which allows increased production of either reserve or generation, as appropriate, having regard to: 

(a)           The commercial interests of Trading Participants; and 

(b)           Market priorities, as reflected by the relevant market prices for energy and reserves in the relevant reserve region.  

3.5.13.3 Prior to the spot market commencement date, the System Operator, in consultation with Trading Participants and the Market Operator, shall publish a general description of the nature of circumstances which will cause it to recommend imposition or relaxation of constraints under clauses 3.5.13.1 or 3.5.13.2 and the type of action which may be taken under those circumstances. 

3.5.13.4 When acting under clause 3.5.13.1 or 3.5.13.2, the System Operator shall: 

(a)           Notify the relevant Trading Participant of the situationas soon as practicable; and 

(b)           Record appropriate details of the incident. 

3.5.13.5 At the request of the Market Operator, the System Operatoror any WESM Member,the market surveillance committeemay review any decision by the Market Operator to impose or relax constraints under clause 3.5.13.1 or 3.5.13.2. 

3.5.13.6 If a review conducted under clause 3.5.13.5 concludes that a Trading Participant or the Market Operator or the System Operator has acted inappropriately, and has thereby imposed significant costs on other parties, the market surveillance committee may refer that matter to the Disputes Resolution Administrator under clause 7.2 or require that Trading Participant or the Market Operator or the System Operator (as the case may be) to pay compensation in accordance with clause 7.2. 

3.6      MARKET DISPATCH OPTIMIZATION MODEL 

3.6.1 Model Definition 

3.6.1.1 The market dispatch         optimization     model simultaneously determines dispatch targets for the end of a trading interval, reserve allocations for the trading interval, associated energy prices at all trading nodes in the power systemand when applicable reserve pricesfor all reserve regions.  

3.6.1.2 The Market Operator shall maintain and publish the formulation of the market dispatch optimization model, and the performance standards, in accordance with the WESM objectives. 

3.6.1.3 The objective of the market dispatch optimization model shall be to maximize the value of dispatched load based on dispatch bids, minus: 

(a)        The cost of dispatched generation based on dispatched offers;

(b)        The cost of dispatched reserves based on reserves contracted for or when applicable reserve offers; and 

(c)         The cost of constraint violation based on the constraint violation coefficients.  

3.6.1.4 In formulating the market dispatch optimization model, the Market Operator and System Operatorshall ensure that the dispatch for each trading intervalis made subject to: 

(a)       Constraints representing limits on generation offer, demand bidand when applicable reserve quantities as specified by Trading Participants in accordance with clause 3.5, except to the extent that as they may be relaxed in accordance with clause 3.5.13; 

(b)       Constraints representing the technical characteristics of reserve facility categories, including when applicable reserve effectiveness factors initially set at one (1); 

(c)       Energy balance equations for each node in the market network model ensuring that the net load forecast for the end of the trading intervalat each market trading nodeas determined by theMarket Operatoris met; 

(d)       Constraints representing limitations on the ramp ratefrom the plant status deemed to apply prior to the commencement of the trading interval;  

(e)       Constraints defining power system reserve requirements asprovided by the System Operator under clause 3.5.3; 

(f)        Network constraints, as implied by the market network modelprovided by the System Operator under clause 3.5.3; 

(g)       Loss and impedance characteristics of market network lines, as advised by the System Operator under clause 3.5.3, and defined in Appendix A2; 

(h)       Constraintson HVDC link operations, as advised by the System Operator under clause 3.5.3, and defined in Appendix A2; 

(i)        Power flow equations, as defined by a DC approximation to an AC power flow within AC sub-systems; 

(j)        Any overriding constraints imposed on the recommendation of the System Operator in accordance with clause 3.5.13; and 

(k)       Any additional constraints due to ancillary servicesor system security requirements. 

3.6.1.5 The market dispatch optimization model shall be designed so that, subject to the approximations and adjustments provided for by clause 3.6.4: 

(a)           It will produce an optimal dispatchgiven the objective defined by clause 3.6.1.3, and the constraint structure defined by clause 3.6.1.4, and specifying dispatch targets for each scheduled generating unit, scheduled load and reserve facility;  

(b)           It will produce a schedule of flows on each transmission linecorresponding to the optimal dispatch determined in accordance with clause 3.6.1.5 (a); 

(c)           It will produce energy prices for each market trading node, and when applicable reserve price for each reserve region, so that the recommended dispatch targets for each individual Trading Participant would be optimal for that participant at those prices, given their offers and demand bidsand after accounting for other constraints which may affect that Trading Participant; and 

(d)           It will perform its functions in accordance with the performance standards approved by the PEM Board.  

3.6.2 Constraint Violation Coefficients 

3.6.2.1 The constraint violation coefficients shall: 

(a)           Be set so as to ensure that the market dispatch model will always find a solution which satisfies all constraints, if such a solution exists; 

(b)           Be set so as to ensure that binding constraints are prioritized, such that constraints resulting in the lowest reduction in the capability of the network, loador generating units will occur first; and 

(c)           Be set so as to ensure that the prices produced by the market optimization algorithm will be appropriate in all the circumstances, taking into consideration the processes defined in section 3.10 to adjust or override those prices for settlement purposes.  

3.6.2.2 The constraint violation coefficients may: 

(a)           Vary according to the time of day, or on any other basis as determined by the Market Operator;  

(b)           Increase progressively as the constraint becomes more severe; and 

(c)           Increase or decrease as a function of the length of time for which the constrainthas been violated. 

3.6.2.3 The constraint violation coefficients for the nodal energy balance equations referred to in clause 3.6.1.4 (c): 

(a)           Will be known as the nodal value of lost load (nodal VoLL); and 

(b)           May vary from nodeto node and/or be set so as to reflect load shedding priorities. 

3.6.3      Interpretation of Model Outputs 

The output of the market dispatch optimization modelis to be interpreted as providing energyand when applicable reserve dispatch targets for the end of each trading intervalto which the market dispatch optimization modelis applied. 

3.6.4      Modelling Approximations 

3.6.4.1If the Market Operator deems it to be appropriate in all the circumstances, the market dispatch optimization modelmay incorporate reasonable approximations so as to render the optimization problem solvable using an established optimization methodology such as linear programming.  

3.6.4.2Any approximations introduced in accordance with clause 3.6.4.1: 

(a)           May involve producing a piece-wise linear approximation to a non-linear function; 

(b)           May involve producing a convex approximation to a non-convex function; 

(c)           May include automated procedures to deal with situations in which a  choice shall be made to impose or relax certain constraints, as provided for in clause 3.5.13; and 

(d)           Shall preserve, under all operating conditions, an accuracy which is generally acceptable to all WESM Members and particularly to any Trading Participants directly affected by such approximations.  

3.6.5      Model Development 

From time to time, the System Operator and the Market Operator shall investigate the scope for further development of the market dispatch optimization model beyond the minimum requirements specified in clause 3.6.1 and, submit their recommendations in a report to the PEM Board for public consultation. 

3.6.6      Market Settlement 

The market shall be cleared, prices determined, and dispatch determined 

according to the model results for each trading interval, in the form that is written.  The model results shall not be challenged ex-post. 

In the event that Trading Participantsidentify solution inconsistencies with the stated definition and objectives of the model, the Market Operatorwill formulate a plan to correct the model. 

Notwithstanding such model solution errors, the spot marketshall continue to be cleared according to the model results until a model revision is put into service in accordance with clause 3.6.5. 

3.7       MARKET PROJECTIONS 

The Market Operator shall prepare and publish week ahead projectionsand day ahead projectionsusing the market dispatch optimization model, in accordance with the timetable. 

3.7.1 Week Ahead Projections 

3.7.1.1 Weekahead projections shall be prepared by the Market Operatorand published daily, in accordance with the timetable, to assist Trading Participants to anticipate and respond to the range of spot market conditions which might reasonably be expected to occur over the forthcoming week.   

3.7.1.2 Market projections shall be prepared for all trading intervalswithin the relevant market horizon as defined in the timetable. 

3.7.2 Day Ahead Projections 

3.7.2.1 Day ahead projections shall be prepared using the market dispatch optimization modelby the Market Operatorand published regularly through the day, in accordance with the timetable, to assist Trading Participantsto anticipate and respond to the range of spot marketconditions which might reasonably be expected to occur over the forthcoming day. 

3.7.2.2 Market projections shall be prepared for all trading intervalswithin the relevant market horizon as defined in the timetable. 

3.7.3 Preparation of Market Projections 

3.7.3.1 Each market projection shall take into consideration: 

(a)     Thenetwork service provider data prepared in accordance with clause 3.5.2; 

(b)     Reserve requirements, the anticipated market network model configuration,constraints and system security requirements for each reserve region, as advised by the System Operator in accordance with clause 3.5.3; 

(c)     The forecast demand information prepared in accordance with clause 3.5.4; 

(d)     The generation offer information submitted by each relevant Trading Participantin accordance with clause 3.5.5; 

(e)     The loading levels for each non-scheduled and NRE generating units with intermittent energy resourcein accordance with clause 3.5.5; and 

(f)       When applicable, the reserve offer information submitted by each relevant Trading Participantin accordance with clause 3.5.7 and 3.5.8. 

3.7.3.2 Prior to the preparation of each set of market projections, the Market Operator shall, in consultation with the System Operator, prepare an expected unrestrained net load forecast in accordance with the procedures developed under clause 3.5.4, and such number of other load scenariosas may be determined in consultation with WESM Participantsand approved by the PEM Board.  

3.7.3.3 The Market Operatorshall prepare a market projection corresponding to each load scenario developed under clause 3.7.3.2. 

3.7.3.4 When a probability of a significant failure in the power systemhas been advised to the System Operator, the Market Operatormay, in consultation with the System Operator, also prepare market projectionsin which the constraintstructure is modified to represent a situation in which such failures occur. 

3.7.3.5 Market projections shall be prepared by the Market Operator through the application of the market dispatch optimization model to all trading intervals within the relevant market horizonas defined in the timetable. 

3.7.3.6 When preparing a market projection, the starting conditions for each successive trading interval shall be determined: 

(a)           In respect of the first trading interval, as the actual, or expected, power system conditions at the time of the commencement of the market projection; and 

(b)           In respect of subsequent trading intervals, as the projected power system conditions determined by the market dispatch optimization model for the end of the previous trading intervalin that market projection. 

3.7.3.7 The Market Operator shall publish additional updated versions of a market projectionin the event of changes which, in the opinion of the Market Operator, are material and which should be communicated to Trading Participants. 

3.7.3.8 The Market Operator shall document the exact procedure it uses for preparation of market projections and make the procedure available to all Trading Participants. 

3.7.4 Published Information 

3.7.4.1 Based on the information referred to in clause 3.7.3, each market projection publishedby the Market Operator in accordance with the timetable shall contain the following information for each trading intervalin the period covered by the market projection: 

(a)           The assumed net load forecast at each market network node, plus required reserves for each reserve region; 

(b)           The required level of reserve for each reserve region;

(c)           Any modifications to plant or network availability which the Market Operatormay have made under clause 3.5.13 in forming this projection; 

(d)           Projected aggregate dispatch of scheduled generating unitsand scheduled loadat each market network node; 

(e)           Projected aggregate cleared reserve quantities for reserve regionsand reserve facility categories; 

(f)             The projected market price for each market trading node; 

(g)           When applicable projected reserve prices for each reserve region; and 

(h)           Identification and quantification of: 

(1)  Projected load shedding requirement; 

(2)  Projected violations of system security; 

(3)  Projected failure to meet reserve requirements;

(4)  Trading intervals for which low or inadequate capacity margins are projected to apply; and 

(5)  Projected congestion on market network lines; and  

(6)  Constraint violation coefficients. 

            3.8      SCHEDULING AND DISPATCH IMPLEMENTATION 

3.8.1 Responsibilites of the Market Operator 

Prior to commencement of each trading interval, the Market Operator shall, in consultation with the Grid Operator, and in accordance with the timetable: 

(a)     Determine, or estimate, the status of all generation facility for that trading interval;

(b)     Prepare a forecast of the unrestrained net load expected at each market trading nodefor the end of that trading interval;  

(c)     Adjust that unrestrained net load forecastto account for load shedding, if required, in accordance with clause 3.9.5; 

(d)     Determine the most appropriate network configuration and state to be assumed for the end of that trading interval; 

(e)     Use the market dispatch optimization model to determine the target loading levelin MW for each scheduled generating unitor scheduled load and for each reserve facility for the end of that trading interval using the latest data from the System Operatorand Trading Participants; and  

(f)       Submit to the System Operatorthe dispatch schedule containing the target loading levels to be achieved at the end of that trading interval, determined in accordance with clause 3.8.1 (e). 

3.8.2 Responsibilities of the System Operator 

3.8.2.1 During each trading interval,the System Operator shall use its reasonable endeavors to:  

(a)     Implement the dispatch targets determined by the Market Operator;  

(b)     Maintain system security consistent with the requirements of the Grid Code; 

(c)     Implement load shedding, if necessary, as provided by clause 

3.9; and 

(d)     Intervene, where necessary, as provided by clauses 6.3 and 6.5.  

3.8.2.2 After each trading interval, in accordance with the timetable, the System Operator shall advise the Market Operator of: 

(a)     Situations in which it became necessary for dispatch instructions to deviate from the dispatch targets determined by the Market Operator during the trading interval; 

(b)     Load sheddingor other directions issued by the System Operator during the trading interval; 

(c)     Significant incidents in which contingency reserve was called upon during the trading interval;

(d)     Network constraints which affected dispatch during the trading interval; 

(e)     Binding security constraints which affected dispatch during the trading interval; and 

(f)       Operational irregularities arising during the trading interval including but not limited to any circumstances in which there was prima facie evidence of a failure to follow dispatch instructions. 

3.8.3 Communication of target loading levels 

The System Operator shall communicate the target loading levelsto Trading Participantsfor each trading interval prior to the commencement of that trading interval in accordance with the timetable and consistent with the Grid Code. 

3.8.4 Dispatched Trading Participants 

Trading Participantswho are dispatchedshall use reasonable endeavors to achieve a linearramp rateover the trading interval to reach the target loading level by the end of that trading intervaland within the dispatchtolerancesspecified in clause 3.8.7 and those Trading Participants will not be required to operate in any different fashion unless required to: 

(a)        Respond in accordance with reserveor ancillary service contracts; or (b)   Respond to a direction in accordance with clauses 6.3 and 6.5.  

3.8.5  Ramp Rate of Trading Participant 

Where applicable, Trading Participantswill be assumed to have a linear ramp rate over that trading interval to reach the target loading levels by the end of that trading interval. 

3.8.6 Deviations from the Ramp Rate 

If Trading Participants in some part of the power system deviate in aggregate from the assumed linear ramp ratefor any reason or as a result of any cause including the initiation of load shedding under clause 3.9.3, these deviations shall be dealt with by the System Operator, utilizing the reserves, or other ancillary services scheduled to deal with such circumstances, in accordance with clause 3.3. 

3.8.7 Dispatch Tolerances  

3.8.7.1 Dispatch tolerances shall be set to allow limits on the extent to which Trading Participants may deviate from dispatch targets issued by the System Operator.  

3.8.7.2 The Market Operator shall maintain and publish dispatch tolerances standards developed by the System Operator for each type of plant, and location, in accordance with the Grid Code and Distribution Code. 

3.8.8 Sanctions of Trading Participants 

Any Trading Participant who consistently fails to use its reasonable endeavors to act in accordance with dispatch instructions issued under clause 3.8.3, or who breaches the dispatch tolerance standards published under clause 3.8.7.2, may be liable of  a sanction imposed under clause 7.2. 

            3.9      TREATMENT OF LOAD SHEDDING AND EXCESS GENERATION 

3.9.1 Direction To Conduct Load Shedding 

The System Operator may direct a Trading Participantto conduct load shedding in response to:

(a) An overall shortage of energy at a node or in a region specified in the market network model; or (b) Other network conditions,  

as determined by the System Operatorin accordance with the procedures established under the Grid Code and Distribution Code.. 

3.9.2 Market Operator Advice On Load Shedding  

In the event that: 

(a)         Day ahead projections performed under clause 3.7; or  (b) Dispatch optimization performed under clause 3.8, 

indicate that nodal energy prices are expected to be equal to, or exceed, nodal VoLL at any customer nodes in the market network model, then the Market Operator shall immediately inform the System Operator of the likelihood of initiating load sheddingat those nodes. 

3.9.3 System Operator Responsibility to Initiate Load Shedding 

The System Operator: 

(a)           Shall, if advised by the Market Operator under clause 3.9.2, consider the need to initiate load shedding, at those nodes, or at other nodes, after taking account of the load shedding targets from the relevant dispatch optimization, and any other considerations which the System Operator considers relevant under the Grid Code and Distribution Code and any other applicable regulatory instrument; and 

(b)           May initiate load shedding in response to any other circumstances which it reasonably considers necessitates such action under the 

Grid Codeand Distribution Code or any other applicable regulatory instrument. 

3.9.4 Advising of Load Shedding 

If it is anticipated that load shedding will occur in a trading interval, theSystem Operator shall, as soon as possible, advise its load shedding plans to: 

(a)                 The Market Operator; and  

(b)                 Trading Participants who are likely to be directly affected by such load shedding.

3.9.5 Revising Forecasts 

If advised by the System Operatorof the likelihood of load shedding in any trading interval under clause 3.9.4, the Market Operator shall, as soon as possible: 

(a)                 If practical within the time frame remaining before the start of that trading interval, revise the load forecasts to be used to determine the dispatch schedule for that trading interval in accordance with clause 3.5.4.4, to account for those load shedding plans; and 

(b)                 Issue additional day ahead projections, if required, under clause 3.7.3.7. 

3.9.6 Pricing Error Notice 

At the commencement of each trading intervalin which the load forecast has been adjusted to account for possible load shedding, or as soon as possible thereafter, the Market Operator shall issue a pricing error notice, in accordance with clause 3.10.5. 

3.9.7 Management of Load Shedding 

The System Operator and the Market Operatorshall manage all aspects of dispatchand pricing during periods when load sheddingis required in accordance with the detailed procedures to be developed by the System Operatorand the Market Operator, in consultation with WESM Participants, and subject to approval by the PEM Board, consistent with the Grid Code and Distribution Code. 

3.9.8 Management Procedures for Excess Generation 

3.9.8.1 Should either the dispatch optimization, or any market projection, indicate excess generationat any node, the Market Operator shall advise the System Operator that it may be necessary to require some generating systems to shut down. 

3.9.8.2 Where necessary to shut down generating systems under clause 3.9.8.1, the System Operatorand the Market Operator shall manage all aspects of dispatchand pricing in accordance with the procedures to be developed by the System Operatorand the Market Operator, in consultation with WESM Participants, and subject to approval by the PEM Board.

3.10 DETERMINATION OF MARKET PRICES  

3.10.1 Calculation of Prices  

For each trading interval, the Market Operatorshall calculate, and publish in accordance with the timetable: 

(a)          Ex-ante nodal energy pricesin accordance with clause 3.10.2;  

(b)             Ex-ante zonal energy pricesin accordance with clause 3.10.3; 

(c)             Ex-post nodal energy pricesin accordance with clause 3.10.6;  

(d)             Ex-post zonal energy pricesin accordance with clause 3.10.8; and 

(e)             When applicable, zonal reserve pricesin accordance with clause 3.10.10.  

3.10.2  Determination of Ex-Ante Nodal Energy Price 

The ex-ante nodal energy price for each market trading nodein any trading interval shall, subject to clause 3.10.5, be determined as the shadow priceon the energy balance equation for that market trading nodeformed in accordance with clause 3.6.1.4 (c), in the dispatch optimization performed for that trading interval in accordance with clause 3.8.1. 

3.10.3 Determination of Ex-Ante Zonal Energy Prices 

Ex-ante zonal energy prices shall be determined for each customer pricing zone. 

3.10.4 Publishing Ex-Ante Prices According to Timetable 

The Market Operatorshall publishthe ex-ante nodal energy pricesand the ex-ante zonal energy prices, prior to the commencement of the trading interval to which they apply in accordance with the timetable.  

3.10.5 Pricing Error Notice 

In the event where no ex-ante prices can be determined or communicated within the timeframe specified by the timetable, or the calculated prices are believed to be in error, as a result of load shedding or for any other reason:  (a) The Market Operatormay issue a pricing error notice, in which case the ex post prices determined according to clause 3.10.7 shall also serve as ex-ante prices. 

(b) If no pricing error noticeis issued within the time specified in the timetable after the start of a trading interval, the ex-post prices shall serve as ex-ante pricesand shall stand irrespective of the outcome of any subsequent investigations or resolution of any dispute. 

3.10.6 Determination of Ex-Post Nodal Energy Price 

The ex-post nodal energy pricefor each market trading nodeshall be determined as the shadow price on the energy balance equation for that market trading node, formed in accordance with clause 3.6.1.4 (c), in a expost dispatch optimization performed, in accordance with the timetable, to determine target dispatchlevels for the end of that trading interval, assuming: 

(a)          The plant status for the beginning of that trading interval as determined for the ex-ante dispatch optimization or, if load shedding  occurred in the previous trading interval, the plant status which would have pertained at the end of the previous trading interval, as indicated by the targets determined by the ex-post dispatch for the previous trading interval;  

(b)          The generation offers which applied at the beginning of the trading interval;

(c)           The unrestrained load determined from metering data, or estimated, after the occurrence of the trading interval, to apply at each market network node on average, over the trading interval; 

(d)          A market network configuration and network state which the Market Operator, in consultation with the System Operator, in its reasonable opinion determines to best represent network conditions pertaining for the duration of the trading interval, as provided for by the procedures developed under clause 3.10.7; and 

(e)          Any relevant constraints recommended by the System Operatorto represent system security conditions or actual generation performance over the trading interval,as provided for by the procedures developed under clause 3.10.7. 

3.10.7 Procedures for Ex-Post Nodal Energy Price 

The Market Operator, in consultation with WESMparticipants, and subject to approval by the PEM Board,shall develop and publish the procedures to be employed in clauses 3.10.6 (d) and (e) in establishing the network configuration and other constraintsto be assumed for the determination of ex-post nodal energy pricesfor circumstances in which power system conditions materially change during the trading interval,with a view to ensuring that: 

(a)          Consistency is maintained between the market network configuration and state determined in accordance with clause 3.10.6 (d), any constraints determined in accordance with clause 3.10.6 (e) and the unrestrained net loads measured or estimated for each market network node in accordance with clause 3.10.6 (c); and 

(b)          The ex-post prices produced in accordance with clause 3.10.6, properly and fairly represent average conditions over the trading interval. 

3.10.8 Determination of Ex-Post Zonal Energy Prices 

The ex-post zonal energy pricesfor each trading interval shall be load weighted average of the ex-post nodal energy prices within a customer pricing zone.   

3.10.9 Determination of Ex-Ante And Ex-Post Energy Settlement Prices 

Subject to clause 3.10.5, the ex-ante energy settlement pricesand ex-post energy settlement prices for each market trading nodein each trading interval shall be: 

(a)          The ex-ante zonal energy price and the ex-post zonal energy price for that trading interval determined for that customer pricing zone in accordance with clauses 3.10.3 and 3.10.8, respectively, if that node is deemed to be a customer node and to lie in a defined customer pricing zone; and 

(b)          The  ex-ante nodal energy price and the ex-post nodal energy price for thatnode, in that trading interval, determined in accordance with clauses 3.10.2 and 3.10.6, respectively, for all other nodes.

3.10.10 Determination of Zonal Reserve Price 

When applicable, the zonal reserve pricefor each market reserve zonein each trading interval shall be determined as the shadow price on the relevant reserve requirement constraint, defined in accordance with clause 3.6.1.4 (e), in the dispatch optimization for that trading intervaland published by the Market Operator before the start of thattrading interval. 

3.11 MARKET INFORMATION 

3.11.1 Market Information 

3.11.1.1         The Market Operator shall publish the following:  

(a)           Nodal energy pricesfor each market trading node;  

(b)           Zonal energy pricesfor each customer energy pricing zone; 

(c)           When applicable, reserve pricesfor each reserve region; and 

(d)           Binding network constraints,  for each trading intervalin accordance with the timetable.

3.11.1.2 As part of the information record under clause 5.2.5, the Market Operator shall retain details of : 

(a)           Final dispatch offers and when applicable, reserve offers; 

(b)           Final dispatch bids; and 

(c)           Actual   availabilities   of  generating units   and scheduled load, 

(d)           Including, for each trading interval and dispatch offer and dispatchbid: 

(e)           The identification of the Trading Participant submitting the dispatch bidor dispatch offeras the case may be; 

(f)            The dispatchbid or dispatch offerprices and quantities; and 

(g)           The time at which any final dispatch offer or dispatch bid was made. 

3.11.1.3 Each trading day, in accordance with the timetable, the Market Operator shall publish: 

(a)        The scheduled generation or scheduled loadand scheduled reserves for each scheduled generating unitand scheduled load, respectively, in each trading interval for the previous trading day; and 

(b)        A summary of the information provided to it with respect to each trading interval by the System Operator in accordance with clause 3.8.2.2. 

3.11.2 Access to Information 

3.11.2.1 All information relating to the operation of the spot marketthat the Market Operatoris required to publishin accordance with the WESM 

Rules shall be made available by the Market Operator via the electronic communications system. 

3.11.2.2 If the Market Operator makes information available under clause 3.11.2.1 by additional means other than the electronic communications system, the Market Operator may, at its discretion, charge a fee for access to that information provided that such fee reflects the Market Operator’s costs of providing that information. 

3.12 FINANCIAL TRANSMISSION RIGHTS  

3.12.1 Market for Transmission Rights 

When necessary or reasonably feasible, the Market Operator shall establish a market for transmission rights as approved by the PEM Board. 

3.12.2 Publication of Rental Information 

The Market Operator shall regularly publish in summary form the rentals associated with each market network lineas calculated under clause 3.13.12. 

3.12.3 Further Transmission Rights 

From time to time, and at least annually, the Market Operator shall assess the potential for the issuance of further transmission rights, of the form provided for in the settlements process defined by clause 3.13. 

3.12.4 Matters to Consider in Assessment 

The assessment shall take account of the: 

(a)          Demand for transmission rightsbetween particular locations, as evidenced by WESM Member submissions; 

(b)          Uncommitted physical capacity between those locations, as indicated by the difference between the physical capacity of the lines involved, and the transmission rightsalready issued; and 

(c)          Economic feasibility of supporting further transmission rights, as indicated by the difference between the line rental trading amounts  calculated for particular lines in accordance with clause 3.13.12, and the cost of supporting transmission rights already issued, as evidenced by the transmission rightstrading amounts calculated in accordance with clause 3.13.13. 

3.12.5 Issuing Transmission Rights 

3.12.5.1 Transmission rightsmay be issued by the Market Operator, and may be settled via the settlements system, in accordance with clause 3.13.15, provided: 

(a)           The issuer of the transmission right enters into a commitment to support that transmission right, in accordance with clause 3.13.2 (d);  

(b)           The issuer of the transmission right complies with such prudential requirements as may be approved by the PEM Board under clause 3.14 taking into account the implied potential exposure of the issuer to settlement price differences between the nodes involved; 

(c)           The transmission rightis defined between two market trading nodes; and 

(d)           The relevant details of the transmission rights are notified to the Market Operator, in accordance with clause 3.13.2. 

3.12.5.2 A WESM Membermay request the Market Operatorto make available a transmission rightat an appropriate price.   

3.12.5.3 The issuance of a transmission rightis not to be unreasonably withheld.  

3.12.6 Accounting for Net Income 

The net income that will be derived by the Market Operatorfrom the transactions required under clause 3.13.16 or from the sale of transmission rights, shall be clearly accounted for, and taken into account when setting the allowable charges under any regulatory instruments applicable to the Market Operator. 

3.13 SETTLEMENT QUANTITIES AND AMOUNTS 

3.13.1 Submission of Bilateral Contract Data 

3.13.1.1 Trading Participants who sell electricity pursuant to bilateral contracts and wish those bilateral contracts to be accounted for in settlements shall, after each trading day,in accordance with the timetable: 

(a)           Submit a schedule to the Market Operatorspecifying the MWH bilateralsell quantitiesat each relevant market trading node, in each trading intervalof that trading day;  

(b)           Identify the counterparty to the bilateral contract; and 

(c)           Provide evidence that the counterparty  to the bilateral contractagrees with the submission made under this clause 3.13.1.1. 

3.13.1.2 Bilateral sell quantities submitted in accordance with clause 3.13.1.1 (a) are to be deemed to be bilateral buy quantities for the party identified in clause 3.13.1.1 (b), at the same market trading node.  

3.13.2 Submission of Transmission Right Data 

3.13.2.1 This section shall apply only upon commencement of the transmission rights market established under clause 3.12.1.   

3.13.2.2 Trading Participantswho hold transmission rights and wish to have those transmission rights accounted for in settlements shall, after each trading day, in accordance with the timetable, submit to the Market Operator a schedule specifying: 

(a)       Thesendingnodeand receivingnodebetween which each 

transmission right applies; 

(b)       The MWH quantities of each transmission right in each trading intervalof that trading day, as they apply at the sending node;

(c)       The agreed loss differential associated with each transmission right, if any, as a proportion of the quantity specified in clause 3.13.2 (b); and 

(d)       That the System Operator is in agreement with the submission made under clause 3.13.2 (and providing evidence of that agreement), and will cover any deficit in that System Operator’s settlements position with the spot marketunder clause 3.13.15.1 (b) arising as a result of honoring this transmission right. 

3.13.3 Data for Bilateral Contracts and Transmission Rights 

The Market Operator shall: 

(a)         Inform the Trading Participants which submitted data under clause 3.13, if any of the data provided is invalid or incomplete; and  

(b)         If the data provided under clause 3.13 is valid or complete, employ that data for settlements purposes in accordance with clauses 3.13.7 and 3.13.13. 

3.13.4 Zonal Reserve Settlement Quantity 

The zonal reserve settlement quantity for each Trading Participantin each trading interval shall be calculated as:  

(a)          The aggregate, across all of the Trading Participant’s facilities in the relevant reserve region, of the reserve target determined by the dispatch optimization performed prior to the beginning of that trading interval, in accordance with clause 3.8.1; multiplied by 

(b)          The reserve effectiveness factorfor that reserve facility category  to be determined by the System Operator. 

3.13.5 Defining the Gross Ex-Ante Energy Settlement Quantity for Market Trading Nodes 

3.13.5.1 For each trading interval, the grossex-ante energy settlement quantity for each market trading node shall be determined by the Market Operatoras follows: 

(a)           If the market trading nodeis defined under clause 3.2.2.1 as lying on the boundary of  the power systemoperated by the System Operator, the gross ex-ante energy settlement quantityfor that market trading nodeis the average of the net expected flows into the power systemoperated by the System Operator through the associated meter, as estimated by the initial conditions assumed for the beginning of the trading interval, and by the forecast, or target, for the end of that trading intervalfor that market trading node assumed in, or estimated by, the dispatch optimization performed prior to the beginning of that trading interval, both adjusted for bilateral contractsin accordance with clause 3.13.7; 

(b)           If the market trading nodeis defined under clause 3.2.2.2 as a generator nodelying on the interface between networks, apparatus or equipment operated by parties other than theSystem Operator, the gross ex-ante energy settlement quantityfor the market trading nodeis the average of the net expected flows through the associated meter from the Generating Company to the Customer side of the meter, as estimated by the initial conditions assumed for the beginning of that trading interval, and by the target generation  for the end of that trading interval for that generator node,both adjusted for bilateral contracts in accordance with clause 3.13.7; and 

(c)           If the market trading nodeis defined under clause 3.2.2.2 as a customer nodelying on the interface between networks, apparatus or equipment operated by parties other than theSystem Operator, the gross ex-ante energy settlement quantity for that market trading node is the negative of the amount determined for the corresponding generator node in clause 3.13.5.1(b). 

3.13.6 Defining the Gross Ex-Post Energy Settlement Quantity for Market Trading Nodes  

For each trading interval, the gross ex-post energy settlement quantityfor each market trading nodeshall be determined by the Market Operatoras follows: 

(a)         If the market trading nodeis defined under clause 3.2.2.1 as lying on the boundary of  the power system operated by the System Operator, the gross ex-post energy settlement quantityfor the market trading nodeis the net meteredflow into the power systemoperated by the System Operator through the associated meter, adjusted for bilateral contracts in accordance with clause 3.13.7; 

(b)         If the market trading nodeis defined under clause 3.2.2.2 as a generator nodelying on the interface between networks, apparatus or equipment operated by parties other than theSystem Operatorthe gross ex-post energy settlement quantityfor the market trading nodeis the net metered flows through the associated meterfrom the Generation Company to the Customer side of the meter adjusted for bilateral contracts in accordance with clause 3.13.7; and 

(c)         If the market trading nodeis defined under clause 3.2.2.2 as a customer nodelying on the interface between networks, apparatus or equipment operated by parties other than the System Operatorthe gross ex-post energy settlement quantity for the market trading nodeis the negative of the amount determined for the correspondinggenerator nodein clause 3.13.6.1(b).

3.13.7 Energy Settlement Quantity Adjustments for Bilaterals 

For settlementpurposes, the ex-ante energy settlement quantity and the expost energy settlement quantity for any market trading nodein any trading interval shall be determined by the Market Operator by adjusting the gross ex-ante energy settlement quantity or gross ex-post energy settlement quantity, as appropriate, for that market trading node and any trading interval, as measured in accordance with clause 3.13.5 or estimated in accordance with clause 3.13.6, for bilateral contractquantities notified to the Market Operator under clause 3.13.1.1, or inferred by theMarket Operator under clause 3.13.1.1 and accepted as valid under clause 3.13.1.2 by: 

(a)         Subtracting all bilateral sell quantities notified for that nodein that tradinginterval from the measured or estimated gross energy settlement quantity for that node in that trading interval; and 

(b)         Adding all bilateral buy quantities inferred for that nodein that trading intervalto the measured or estimated gross energy settlement quantity for that nodein that trading interval. 

3.13.8     Determining the Ex Ante Energy Trading Amount 

For settlementpurposes, the ex-anteenergy trading amountfor each market trading nodeand trading intervalwill be determined as the ex-ante energy settlement pricefor that nodein that trading intervalmultiplied by the ex-ante energy settlement quantity(in MWh) for that nodein that trading interval.  

3.13.9     Determining the Ex Post Energy Trading Amount 

For settlementpurposes, the ex postenergy trading amountfor each market trading nodeand trading intervalwill be determined as: 

(a)        The ex-post energy settlement pricefor that node in that trading interval multiplied by the ex-post energy settlement quantity for that node in that trading interval(in MWh); minus  

(b)        The ex-post energy settlement pricefor that node in that trading interval multiplied by the ex-ante energy settlement quantity for that nodein that trading interval (in MWh). 

3.13.10 Determining the Reserve Trading Amount 

3.13.10.1 For settlement purposes, the reserve trading amount for each Trading Participant who supplies reserveto a particular reserve regionin a trading intervalwill be determined as the zonal reserve pricefor thatreserve regionin that trading intervalmultiplied by the zonal reserve settlement quantity for that Trading Participantin that reserve regionfor that trading interval.  

3.13.10.2 During the initial operation of the interim WESM, the reservetrading amount shall be calculated based on the cost of reservescontracted for by the System Operator.

      3.13.11      Determining the Reserve Cost Recovery Charge 

The reservecost recovery charge for settlementpurposes will be determined for each Trading Participantin each trading interval in accordance with the procedures developed under clause 3.3.5. 

      3.13.12      Calculation of Line Rental Trading Amounts 

The Market Operator shall calculate the line rental trading amounts for each transmission linein the market network model as: 

(a)     The expected flow of energy out of the receiving node of the market network line as determined by themarket dispatch optimization model by the ex-ante nodal energy settlement price at that node; less 

(b)     The expected flow of energy into the sending node multiplied by the ex-ante nodal energy settlement price at that node of the market network line as determined by the market dispatch optimization model. 

      3.13.13     Determining the Transmission Rights Trading Amount 

For settlementpurposes, the transmission right trading amountfor each transmission right in eachtrading interval  is to be determined as: 

(a)     The MWh capacity of that transmission right in that trading interval as notified under clause 3.13.2, multiplied by the ex ante energy settlement pricefor the receiving node in that trading interval; minus the sum of  

(b)     The MWh capacity of that transmission right, in that trading interval, as notified under clause 3.13.2, multiplied by the ex ante energy settlement priceat the sending node in that trading interval; plus

(c)     The MWh capacity of that transmission right in that trading interval, as notified under clause 3.13.2,multiplied by the agreed loss differential for that transmission right, as notified under clause 3.13.2, multiplied by the ex ante energy settlement priceat the receiving node in that trading interval. 

                  3.13.14    Settlement Amounts for Trading Participants  

3.13.14.1 For each billing period, the Market Operator shall determine the settlement amount for each Trading Participant as the sum of the aggregate trading amounts for the trading intervals in that billing period,determined in accordance with clause 3.13.14.2: 

(a)   Any amount payable by the Market Operator to that Trading Participant in respect of that billing period and not accounted for in clause 3.13.14.2, including payment for any ancillary services purchased on behalf of the System Operator; less the sum of 

(b)   Anymarket fees which that Trading Participant is required to pay in respect of that billing period as determined in accordance with clause 2.10; plus 

(c)   Any other amounts payable by that Trading Participant to the Market Operatorin respect of that billing period, including any ancillary services cost recovery charges. 

3.13.14.2 The aggregate trading amount for a Trading Participant for a trading interval equals the sum of:

(a)   The ex-anteenergytrading amounts for each market trading node for which that Trading Participantis responsible calculated in accordance with clause 3.13.8(which will typically be positive for a Generation Company and negative for a Customer); plus 

(b)   The ex-post energytrading amounts for each market trading node for which that Trading Participantis responsible calculated in accordance with clause 3.13.9 (which may be positive or negative for any Trading Participant); plus 

(c)   The reserve trading amounts for each reserve regioninto which that Trading Participant contributes reserve calculated in accordance with clause 3.13.10 (which will always be positive for both Generation Companies and Customers); plus 

(d)   The transmission right trading amounts for each transmission right held by the WESM Participantcalculated in accordance with clause 3.13.13 (which will typically be positive forany Trading Participant); less the sum of 

(e)   The reserve cost recovery charge determined for that Trading Participant with respect to any reserve cost recovery zonewithin which it has any facility connected calculated in accordance with the procedures developed under clause 3.3.5 (which will be positive for any Trading Participant); and 

(f)    Any other ancillary service cost recovery charges determined for that Trading Participantin accordance with the procedures developed under clause 3.3.5 (which will be positive for any Trading Participant). 

      3.13.15     Settlement Amounts for the Network Service Provider 

3.13.15.1 For each billing period,the Market Operator shall determine the settlement amount for the Network Service Provider as the sum over all trading intervals in that billing period of: 

(a)   Theline rental trading amountscalculated for each transmission lineowned by the TRANSCOin accordance with clause 3.13.12 (which will typically be positive); minus the sum of 

(b)   The transmission right trading amounts for each transmission right for which the SystemOperatorhas agreed to support in accordance with clause 3.13.2 calculated in accordance with clause 3.13.13 (which will typically be positive). 

      3.13.16     Treatment of Remaining Settlement Surplus 

3.13.16.1 If the transactions required by clauses 3.13.14 and 3.13.15, in aggregate, result in a surplus or deficit remaining, this will be known as the net settlement surplus.   

3.13.16.2 The net settlement surplus: 

(a)   May be retained by the Market Operator, or paid to the System Operator,according toa formula to be developed by the Market Operator subject to approval of the PEM Board; and 

(b)   Shall be clearly accounted for and taken into account when setting the allowable charges under any regulatory instruments applying to the Market Operatorand the System Operator. 

3.13.16.3 The Market Operatorshall: 

(a)   Publishregular summary reports on the amount of any net settlement surplus being generated; 

(b)   Within one year from spot market commencement date, and every year thereafter, publisha review of the underlying factors giving rise to any net settlement surplus, and attempt to identify any binding constraints which may have caused or contributed to such net settlement surplus; and 

(c)   Determine, in consultation with Trading Participantsand Network Service Providers, and subject to approval by the PEM Board, whether the net settlement surplus generated by any particular set of constraints is of such magnitude as to justify development of a regime similar to that implemented in the WESM Rules with respect to transmission line rentals and transmission rights. 

3.14 SETTLEMENT PROCESS  

3.14.1 Settlements Management by Market Operator 

The Market Operatorshall determine the settlement amount payable by WESM Members and facilitate the billing and settlement of transactions between itself and the WESM Members under the WESM Rulesin accordance with this clause 3.14.  

3.14.2 Electronic Funds Transfer 

3.14.2.1 TheMarket Operator shall ensure that an EFT facility is provided and made available for all WESM Members for the purposes of facilitating settlements and the collection and payment of all market fees.  

3.14.2.2 Unless otherwise authorized by the Market Operator,all WESM 

Members shall use the EFT facility provided by the Market Operator under clause 3.14.2.1 for the settlement of transactionsand the payment of market fees.  

3.14.3 Payment of Settlement Amount 

3.14.3.1 Where the settlement amount for a WESM Member is a negative amount, the WESM Membershall pay that amount to Market Operator in accordance with clause 3.14.6.  

3.14.3.2 Where the settlement amount for a WESM Member is a positive amount, Market Operator shall pay that amount to the WESM Memberin accordance with clause 3.14.7. 

3.14.4 Preliminary Statements 

3.14.4.1 Within 7 business days after the end of each billing period, the Market Operatorshall give each WESM Memberwho has engaged in market transactions in that billing period a preliminary statement which sets out the market transactions of that WESM Member in that billing period and the settlement amount payable by or to that 

WESM Member. 

3.14.4.2 The statements issued under this clause 3.14.4 shall include supporting data for all amounts payable sufficient to enable each WESM Memberto audit the calculation of the amount payable by or to that WESM Member. 

3.14.4.3 If the WESM Memberreasonably believes there was an error or discrepancy in the preliminary statement given to the WESM Memberby the Market Operator under this clause 3.14.4, the WESM Membershall notify the Market Operatoras soon as practicable of that error or discrepancy and the Market Operatorshall review the preliminary statement. 

3.14.4.4 If the Market Operator considers that a preliminary statement contains an error or discrepancy after reviewing the preliminary statement under clause 3.14.4.3, the Market Operatorshall notify all WESM Members whose final statements will be affected by the error or discrepancy within 7 days of the date on which the error or discrepancy first came to the attention of the Market Operator and the Market Operator shall ensure that the error or discrepancy is corrected in the relevant final statements. 

3.14.5 Final Statements 

3.14.5.1 No later than eighteen business days after the end of each billing period, the Market Operator shall give to each WESM Member who has engaged in market transactions in that billing period afinal statement stating the amounts payable by the WESM Member to the Market Operator or payable by the Market Operator to the WESM Memberin respect of the relevant billing period. 

3.14.5.2 The statements issued under this clause 3.14.5 shall include supporting data for all amounts payable which shall be sufficient to enable each WESM Memberto audit the calculation of the amount payable by or to that WESM Member. 

3.14.6 Payment by Trading Participants 

No later than 3.00 pm on the thirtieth business day after the end of a billing periodor 3.00 pm on the twelfthbusiness day after receiving a final statement under clause 3.14.5, whichever is the later, each WESM Member shall pay to the Market Operator in cleared funds the settlement amount (if any) stated to be payable to the Market Operator by that WESM Member in that WESM Member’s final statement, whether or not the WESM Member disputes, or continues to dispute, the amount payable. 

3.14.7 Payment to Trading Participants 

By no later than 3.00 pm on the day on which the Market Operator is to be paid under clause 3.14.6, the Market Operatorshall pay to each WESM Memberin cleared funds the settlement amount (if any) stated to be payable to that WESM Memberin that WESM Member’s final statement. 

3.14.8 Disputes 

3.14.8.1 If a dispute arises between aWESM Memberand the Market Operator concerning either: 

(a)           The settlement amount stated in any preliminary statement provided under clause 3.14.4 to be payable by or to it; or  

(b)           The supporting data,  they shall each use reasonable endeavors to resolve the dispute within fifteen business daysafter the end of the relevant billing period. 

3.14.8.2 Disputes in respect of final statements or the supporting data provided with them in accordance with clause 3.14.5 shall be raised within twelve months of the relevant billing period. 

3.14.8.3 Disputes raised under this clause 3.14.8 shall be resolved by agreement or pursuant to the dispute resolution procedures set out in clause 7.3. 

3.14.9 Settlement Revisions  

3.14.9.1 If an amount in a final statement issued under clause 3.14.5:  

(a)           Has been the subject of a dispute and the dispute has been resolved in any way which causes the amount payable to differ from the amount payable as set out in the final statement;or 

(b)           Has been identified as being in error in accordance with clause 3.14.9.2 and the correct amount has been determined by the Market Operator, 

(c)           The Market Operator shall issue to each WESM Member affected by the resolution of the dispute or the correction of the error a revised statement for the relevant billing period setting out: 

(d)           The amount payable by the WESM Memberto the Market Operator or the amount payable by the Market Operator to the WESM Member; and 

(e)           The adjustment to the final statement as agreed or determined plus interest calculated on a daily basis at the interest rate for the period from the payment date applicable to the final statement to which the adjustment relates to the payment date applicable to the revised statement issued under this clause 3.14.9.1. 

3.14.9.2 If the Market Operator becomes aware of an error in an amount stated in a final statement issued under clause 3.14.5 and, in the Market Operator’s reasonable opinion, a WESM Member would be materially affected if a revision to the final statement was not made to correct the error, then the Market Operator shall issue revised statementsfor the relevant billing periodin accordance with clause 3.14.9.1. 

3.14.10 Payment of Adjustments 

3.14.10.1 The Market Operator shall specify the time and date on which a payment of an adjustment under a revised statement issued under clause 3.14.9 is due, which date shall be not less than ten business days and not more than fifteen business days after the issue of that revised statement.  

3.14.10.2 By no later than the time and date specified by the Market Operatorpursuant to clause 3.14.10.1, each WESM Membershall pay to the Market Operator in cleared funds the net amount (if any) stated to be payable by that WESM Member in the revised statement issued to it under clause 3.14.9. 

3.14.10.3 On the day on which the Market Operator is to be paid under clause 3.14.10.2, the Market Operatorshall pay to each WESM Memberin cleared funds the net amount (if any) stated to be payable to that WESM Memberin the revised statement issued to it under clause 3.14.9. 

      3.14.11     Payment Default Procedure 

3.14.11.1 Each of the following events is a default eventin relation to a WESM Member: 

(a)           The WESM Memberdoes not pay any money due for payment by it under the WESM Rulesby the appointed time on the due date; 

(b)           The Market Operator does not receive payment in full of any amount claimed by the Market Operator under any credit supportin respect of a WESM Member, within ninety minutes after the due time for payment of that claim; 

(c)           The WESM Member fails to provide credit support required to be supplied under the WESM Rulesby the appointed time on the due date; 

(d)           It is or becomes unlawful for the WESM Memberto comply with any of its obligations under the WESM Rulesor any other obligation owed to the Market Operator or it is claimed to be so by the WESM Member; 

(e)           It is or becomes unlawful for any Credit Support Provider in relation to the WESM Memberto comply with any of its obligations under the WESM Rulesor any other obligation owed to the Market Operator or it is claimed to be so by that Credit Support Provider; 

(f)            An authorization from a government authority necessary to enable the WESM Memberor a Credit Support Provider which has provided credit support for that WESM Member to carry on their respective principal businesses or activities ceases to have full force and effect; 

(g)           The WESM Member or a Credit Support Provider which has provided credit support for that WESM Member ceases or is likely to cease to carry on its business or a substantial part of its business; 

(h)           The WESM Member or a Credit Support Provider which has provided credit support for that WESM Member enters into or takes any action to enter into an arrangement (including a scheme of arrangement), composition or compromise with, or assignment for the benefit of, all or any class of their respective creditors or members, or a moratorium involving any of them; 

(i)             The WESM Member or a Credit Support Provider which has provided credit support for that WESM Memberstates that it is unable to pay from its own money its debts as and when they fall due for payment; 

(j)             A receiver or receiver and manager is appointed in respect of any property of the WESM Member or a Credit Support Provider which has provided credit support for that WESM Member; 

(k)           An administrator, provisional liquidator, liquidator, trustee in bankruptcy or person having a similar or analogous function is appointed in respect of the WESM Member or a Credit Support Provider which has provided credit support for that WESM Member, or any action is taken to appoint any such person; 

(l)             An application or order is made for the winding up or dissolution or a resolution is passed or any steps are taken to pass a resolution for the winding up or dissolution of the WESM Member or a Credit Support Provider which has provided credit support for that WESM Member; 

(m)         The WESM Member or a Credit Support Provider which has provided credit support for that WESM Member dies or is dissolved unless such notice of dissolution is discharged; and 

(n)           The WESM Member or a Credit Support Provider which has provided credit support for that WESM Member is taken to be insolvent or unable to pay its debts under any applicable legislation. 

3.14.11.2 Where a default event has occurred in relation to a WESM Member, the Market Operator may:

(a)   Issue a default noticewhich specifies: 

(1)  The nature of the alleged default; and  

(2)  If the Market Operator considers that the default is capable of remedy, that the WESM Member shall remedy the default within 24 hours of the issue of the default notice; and/or 

(b)   Immediately issue a suspension notice in accordance with clause 3.15.7 if the Market Operator considers that the default is not capable of remedy and that failure to issue a suspension notice would be likely to expose other WESM Membersto greater risk; and/or 

(c)   If it has not already done so, make a claim upon any credit supportheld in respect of the WESM Member for such amount as the Market Operator determines represents the amount of any money actually or contingently owing by the WESM Member to the Market Operator pursuant to the WESM Rules. 

3.14.11.3 If: 

(a)   TheMarket Operator considers that a default event is not capable of remedy; or 

(b)   Adefault event is not remedied within 24 hours of the issue of the default noticeor any later deadline agreed to in writing by the Market Operator; or  

(c)   TheMarket Operator receives notice from the defaulting WESM Member that it is not likely to remedy the default specified in the default notice,  

then the Market Operator may issue a suspension notice in accordance with clause 3.15.7 under which the Market Operator notifies the defaulting WESM Member that it is prohibited from participating in the spot market. 

3.14.12 Interest on Overdue Amounts 

If a Trading Participant fails to pay any amount due and payable by it under the WESM Rules, such overdue amount shall bear the default interest rate reckoned from the first day such amount is due and payable, up to and including the date on which payment is made, with interest computed based on a 360-day year. 

3.15 PRUDENTIAL REQUIREMENTS 

3.15.1 Purpose 

The purpose of the prudential requirementsis to ensure the effective operation of the spot market by providing a level of comfort that WESM Members will meet their obligations to make payments as required under the WESM Rules. 

3.15.2 Provision of Security 

3.15.2.1         Subject to clause 3.15.2.2, a Trading Participant wishing to participate in market transactions shall provide and maintain a security complying with the requirements of this clause 3.15.2. 

3.15.2.2 The Market Operatormay exempt WESM Members from the requirement to provide a security under clause 3.15.2.1, if:  

(a)           the Market Operator believes it is likely that the amount payable by the Market Operator to that WESM Member under the WESM Rules will consistently exceed the amount payable to the Market Operator by that WESM Memberunder the WESM Rulesin respect of that period; or

(b)           the Market Operator believes it is unlikely that the WESM Member will be required to pay any amounts to the Market Operator; or 

(c)           the Trading Participantis a Distribution Utility that demonstrates the financial capability by complying with agreed upon financial covenants and that such exemption is subject to the approval of the PEM Board. 

3.15.2.3 If, under clause 3.15.2.2, the Market Operatorhas exempted a WESM Member from the requirement to provide a security under clause 3.15.2.1, then the Market Operatormay vary or cancel the exemption at any time by giving written notice of the variation or cancellation of the exemption to the WESM Member. 

3.15.3 Form of Security 

The security provided by a WESM Memberunder this clause 3.15 shall be either: 

(a)     A bank guarantee in a form and from a bank acceptable to the Market Operator; or 

(b)     Another immediate, irrevocable and unconditional commitment in a form and from a bank or other institution acceptable to the Market Operator; or 

(c)     Surety Bond issued by a surety or insurance company duly accredited by the Office of the Insurance Commissioner of the Philippines. 

3.15.4 Amount of Security 

3.15.4.1 Subject to clause 3.15.2.2, prior to the end of each financial year the Market Operator shall determine and provide written confirmation to each WESM Memberof its maximum exposure to the Market Operator in respect of a billing period in the following financial year. 

3.15.4.2 The Market Operatormay review its determination of a WESM Member’s maximum exposure at any time, provided that any change to a WESM Member’s maximum exposure will apply no earlier than thirty days following notification by the Market Operator to that WESM Member of that change or such earlier period agreed by the PEM Board.  

3.15.4.3 Each WESM Member shall ensure that at all times the aggregate undrawn and unclaimed amounts of current and valid security held by the Market Operator in respect of that WESM Member is not less than that WESM Member’s maximum exposure. 

3.15.4.4 To diminish the possibility of incurring a margin call under clause 3.15.10, a WESM Member may in its absolute discretion provide to the Market Operator a security or securities in accordance with clause 3.15.3 for an aggregate amount which exceeds its maximum exposure. 

3.15.5 Replacement Security 

3.15.5.1 If: 

(a)           An existing security provided by a WESM Memberunder this 

clause 3.15 is due to expire or terminate; and 

(b)           After that security expires or terminates, the maximum amount which the Market Operatorwill be entitled to be paid in aggregate under any remaining security or securities provided by the WESM Memberunder this clause 3.15 will be less than WESM Member’s maximum exposure, 

(c)           Then the WESM Membershall deliver to the Market Operator, at least ten business daysprior to the time at which that existing security is due to expire or terminate, a replacement security which: 

(1)   Is of sufficient value to enable the WESM Member to comply with clause 3.15.4.3; 

(2)   Complies with the requirements of this clause 3.15; and 

(3)   Will take effect no later than the date on which the existing security is due to expire or terminate. 

3.15.5.2 If: 

(a)           A WESM Member  fails to comply with clause 3.15.5.1; and 

(b)           That WESM Member does not remedy that failure within 24 

hours after being notified by the Market Operator of the failure, then the Market Operator shall give the WESM Membera suspension notice in accordance with clause 3.15.7. 

3.15.6 Drawdown of Security 

3.15.6.1 If the Market Operator exercises its rights in accordance with this clause 3.15 under a security provided by a WESM Member under this clause 3.15, then the Market Operator shall notify the WESM Member.

3.15.6.2 If, as a result of the Market Operator exercising its rights under a security provided by a WESM Member under this clause 3.15, the maximum amount which the Market Operator is entitled to be paid under the security or securities provided by the WESM Member under this clause 3.15 is less than the WESM Member’s maximum exposure, then, within 24 hours of receiving a notice under clause 3.15.6.1, the WESM Member shall provide an additional security to ensure that at all times, it complies with the requirements of this clause 3.15. 

3.15.6.3 If a WESM Member fails to comply with clause 3.15.6.2 within the time period referred to in that clause, then the Market Operator shall give the WESM Membera suspension notice in accordance with clause 3.15.7. 

3.15.7 Suspension of a WESM Member 

3.15.7.1 As soon as practicable after a suspension noticeis issued by the Market Operator under the WESM Rules, the Market Operator shall:  

(a)           Publish the suspension notice; and 

(b)           Place a notice in a newspaper of general circulation that the WESM Member  has been suspended. 

3.15.7.2 The Market Operator shall revoke a suspension notice if: 

(a)           In the case of a default event, the default eventis remedied; or 

(b)           In the case of a failure to maintain compliance with prudential requirements under this clause 3.15, that failure has been remedied; and  

(c)           There are no other circumstances in existence which would entitle the Market Operator to issue a suspension notice, except that the Market Operator shall not revoke a suspension notice more than one month after it was issued. 

3.15.7.3 If a suspension notice is revoked, the Market Operator shall publicizethat fact in the same manner in which the suspension notice was publicizedin accordance with clause 3.15.7.1. 

3.15.7.4 From the time that the Market Operator issues a suspension noticeto a WESM Memberunder the WESM Rules, the WESM Memberis ineligible to participate in the spot market, until such time as the Market Operator notifies the WESM Memberand all other relevant Trading Participantsthat the suspension noticehas been revoked. 

3.15.7.5 A WESM Member shall comply with a suspension noticeissued to it under the WESM Rules. 

                        3.15.7.6    If: 

(a)     TheMarket Operator has issued a suspension notice to a WESM Member due to a default event and in the Market Operator’s reasonable opinion theWESM Member is incapable of rectifying the default event for any reason; or 

(b)     TheMarket Operatorhas issued a suspension notice to a WESM Memberdue to a failure by the WESM Memberto continue to satisfy the prudential requirements and in the Market Operator’sreasonable opinion theWESM Memberis incapable of rectifying that failure for any reason, 

the Market Operator shall deregister that WESM Member as soon as practicable and promptly publish a notice of that fact. 

3.15.8 Trading Limits 

3.15.8.1 Subject to clause 3.15.8.2, the Market Operator shall set a trading limitfor each WESM Memberwho participates in market transactions. 

3.15.8.2 If, under clause 3.15.2.2, the Market Operator has exempted a Trading Participant from the requirement to provide a security under clause 3.15.2.1 for a period, then the Market Operator shall not set a trading limitfor that WESM Memberfor the period during which that exemption applies. 

3.15.8.3 The trading limitfor a WESM Member at any time shall not be greater than 85% of the total value of the security provided by the WESM Member to the Market Operator under clauses 3.15.3 (a), (b) and (c). 

3.15.9 Monitoring 

3.15.9.1 Each day, the Market Operatorshall review itsactual exposure to each WESM Memberin respect of previous billing periodsunder the WESM Rules. 

3.15.9.2 In calculating the Market Operator’s actual exposure to a WESM Member under clause 3.15.9.1, the period between the start of the billing period in which the review occurs and the start of the trading dayimmediately following the day on which the review occurs is to be treated as a previous billing period. 

3.15.9.3 In calculating the Market Operator’s actual exposure to a WESM Memberunder clause 3.15.9.1, the Market Operator shall take into account:

(a)           Outstanding settlement amounts for the WESM Member in respect of previous billing periods; and  

(b)           Settlement amountsfor the WESM Memberfor trading intervalsfrom the start of the billing periodin which the review occurs to the end of the trading dayon which the review occurs based on: 

(1)  Actualmarket pricesor, if actual market pricesare not available for all or part of a trading day, the market pricesforecast for the relevant trading dayas specifiedin the relevant day ahead projection; and 

(2)  Actualmetered quantities for the WESM Member or, if actual metered quantities are not available for a trading interval, then a trading imbalance for that trading interval determined by the Market Operator as the average of the trading imbalances of that WESM Memberfor the corresponding trading intervalon the corresponding trading daysof the four previous weeks. 

3.15.9.4 If the Market Operator calculates that its actual exposure to a WESM Memberexceeds the WESM Member’s trading limit, then the Market Operator shall notify the WESM Member accordingly. 

            3.15.10      Margin Calls 

3.15.10.1  If the Market Operator calculates that its exposure to a WESM 

Memberexceeds the WESM Member’strading limit, then the Market Operator shall make a margin call on that WESM Memberby notice to the WESM Member. 

3.15.10.2  If the Market Operator makes a margin call on a WESM Memberunder clause 3.15.10.1, then the WESM Membermust satisfy the margin call within the period determined in accordance with clause 3.15.10.3 by either: 

(a)             Providing to the Market Operator an additional security or securities complying with the requirements of this clause 3.15 which enables the Market Operator to increase the 

WESM Member’s trading limitto a level which exceeds the Market Operator’s actual exposure to the WESM Member; or 

(b)             Prepaying a portion of the amount payable or which will become payable in respect of previous billing periodssufficient to reduce the Market Operator’s actual exposure to the WESM Memberto below the WESM Member’s trading limit. 

3.15.10.3     The period within which a margin call must be satisfied under clause 

3.15.10.2 is: 

(a)             If the margin call is made on a business daybefore 10:00 am, then the period commences at the time the margin call is made and finishes at 3:00 pm on that business day; and 

(b)             If clause 3.15.10.3 (a) does not apply, then the period commences when the margin call is made and ends at 10:00 am on the first business dayto occur after the margin call is made. 

3.15.10.4 For the purposes of the WESM Rules, a prepayment under clause 3.15.10.2(b) is taken to relate to the earliest billing periodin respect of which the relevant WESM Memberowes the Market Operator an 

amount of money under the WESM Rules and, if the amount the WESM Member owes under the WESM Rulesin respect of that billing periodis less than the amount of the prepayment, then the excess is taken to relate to the billing periods occurring immediately after the earliest billing period in respect of which the relevant WESM Memberowes the Market Operator an amount of money under the WESM Rulesin chronological order until there is no excess. 

3.15.10.5 If a WESM Memberfails to satisfy a margin call by providing an additional security or making a prepayment under clause 3.15.10.2 within the time referred to in that clause, then the Market Operator shall give the WESM Membera suspensi on notice. 

      3.15.11    Confidentiality 

All information provided by a WESM Member in relation to its financial circumstances shall be treated by the Market Operator as confidential informationin accordance with clause 5.2. 

CHAPTER 4 

METERING 

            4.1      SCOPE OF CHAPTER 4 

This chapter 4 sets out the: 

(a)           Obligations of Trading Participants; 

(b)           Requirements in relation to the installation, use and security of meters; 

(c)           Manner in which metering data is to be used and managed; 

(d)           Method of deregistration of Metering Services Providers; (e) Manner in which metering databases are to be managed; and (f) Manner in which new technologies are to be adopted. 

            4.2      APPLICATION OF CHAPTER 

This chapter 4 applies to: 

(a)  A Customer in respect of any connection point through which it purchases electricity from the spot market;  

(b)  A Generation Company in respect of a connection pointt hrough which it sells electricity to the spot market;  

(c)   Metering Services Providers in respect of metering installations for which they are responsible; and 

(d)  All WESM members as far as applicable. 

            4.3      OBLIGATIONS OF TRADING PARTICIPANTS 

4.3.1 Obligations 

4.3.1.1 Before a Trading Participant who is a Direct WESM Member will be permitted by theMarket Operatorto participate in the spot market in respect of a connection point,the Trading Participantshall ensure that: (a) Each of its connection pointshas a metering installation;

(b)        Each metering installationhas been installed in accordance with this chapter 4 and in accordance with the Grid Code and Distribution Code; and 

(c)         Each metering installationis registered with theMarket Operator. 

4.3.1.2 The Market Operatormay refuse to permit a Trading Participant who is a Direct WESM Member to participate in thespot marketin respect of any connection point if the metering installationat that connection pointdoes 

not comply with the provisions or requirements of this chapter 4, the Grid Code and Distribution Code.  

4.3.1.3 The Market Operator shall promptly advise the ERC of any refusal madeunder clause 4.3.1.2. 

4.3.2 Election of a Metering Services Provider by a Trading Participant  

4.3.2.1 A Trading Participantwho is a Direct WESM Member shall: 

(a)        Elect a Metering Services Provider who will have responsibility  for arranging for the provision, installation, testing, calibration and maintenance of each metering installationfor which that Trading Participant is financially responsible; 

(b)        Enter into an agreement with the Metering Services Provider(s)which includes the terms and conditions for the provision, installation and maintenance of the relevant metering installationby the Metering Services Provider; and 

(c)         Provide the Market Operatorwith the relevant details of the metering installationin accordance with Appendix B2 within 10 business daysof entering into an agreement with the Metering Services Provider(s) under clause 4.3.4(b). 

4.3.3  Metering Services Provider Obligations 

The Metering Services Provider shall: 

(a)         Ensure that its metering installationsare provided, installed, tested, calibrated and maintained in accordance with thischapter 4, the Grid Code and Distribution Code and all applicable laws, rules and regulations; 

(b)         Ensure that the accuracy of each of its metering installationscomplies with the requirements of chapter 4 and the Grid Code and Distribution Code; and 

(c)         If the Market Operator requires, arrange for the provision of remote monitoring facilities to alert theMarket Operatorof any failure of any components of the metering installation which might affect the accuracy of the metering dataderived from that metering installation.  

4.4      REGISTRATION OF METERING SERVICES PROVIDERS

4.4.1 Other than the TRANSCO, a Metering Services Provideris a person or an entity who: 

(a)           Is authorized by the ERC to provide metering services;  

(b)           Is registered with the Market Operatoras a Metering Services Provider; and 

(c)           Is required to have the qualifications and adhere to any performance standards specified by the Market Operatorin relation to Metering Services Providers. 

4.4.2 Subject to clause 4.3.3.3, a Generation Companyor Customerwhich is involved in the trading of energyshall not be registered as a Metering Services Providerfor any connection pointin respect of which the metering datarelates to its own use of energy.

4.4.3 If a Trading Participantis a Customerand also a Network Service Provider, the Trading Participantmay register as a Metering Services Provideronly for connection points that it does not own. 

            4.5      METERING INSTALLATION 

4.5.1 Metering Installation Components 

A metering installation shall: 

(a)       Be accurate in accordance with this chapter 4 and the Grid Code and Distribution Code; 

(b)       Have facilities to enable metering data to be transmitted from the metering installation to the metering database, andbe capable of communication with the metering database; This requirement may be relaxed during the operation of the interim WESM. 

(c)       Contain a device which has a visible or an equivalently accessible display of metering dataor which allows the metering datato be accessed and read at the same time by portable computer or other equipment of a type or specification reasonably acceptable to all entities who are entitled to have access to that metering data; (d) Be secure; 

(e)       Have electronic data recording facilities such that all metering data can be measured and recorded in trading intervals; 

(f)        Be capable of separately registering and recording flows in each direction where bi-directional active energy flows occur;  

(g)       Have a meter having an internal or external data logger capable of storing the metering datafor at least 60 days and have a back up storage facility enabling metering data to be stored for 48 hours in the event of external power failure; and  

(h)       Have an active energy meter, and if required in accordance with the Grid Codeand Distribution Code, a reactive energy meter, having both an internal or external data logger. 

4.5.2 Location of Metering Point 

4.5.2.1 The Metering Services Provider shall ensure that the metering pointis located as close as practicable to the connection point. 

4.5.2.2 The Trading Participant, the Network Service Provider and the Market Operatorshall use their best endeavors to agree to adjust the metering datathat is recorded in the metering databaseto allow for physical losses between the metering pointand the relevantconnection point. 

4.5.2.3 The metering installationshall be accessible to the Metering Service Providerat all times.   

4.5.3 Meter Accuracy  

The class of metering installationand the accuracy requirements for a metering pointare to be determined by the PEM Boardin accordance with the Grid Code and Distribution Codeand according to the annual amount of active energythat passes through the metering pointof that Trading Participant. 

4.5.4 Use of Meters 

4.5.4.1 The registered metering installationshall be  used by the Market Operatoras the primary source of metering datafor billing purposes. 

4.5.4.2 Notwithstanding any other provision of this clause 4.4, theMarket Operator will not be liable to any person or entity in respect of any inaccuracies, discrepancies or other defects in metering data, including metering datawhich is stored in the metering database provided that these do not arise from the gross negligence or willful misconduct of the Market Operator.

4.5.4.3 Where a metering installationis used for purposes in addition to the provision of metering datato theMarket Operator then: 

(a)     That use shall not be inconsistent with, or cause any WESM Member to breach, any requirements of the WESM Rules, the Grid Codeand Distribution Codeor any applicable laws; and 

(b)     TheMetering Services Provider shall coordinate with the entities that use the metering installationfor such other purposes to ensure that clause 4.4.4.3 (a) is complied with. 

4.5.5 Security of Metering Equipment 

4.5.5.1 The Metering Services Providershall use reasonable endeavors to protect the metering installationfrom unauthorized interference both intentional and inadvertent by providing secure housing for metering equipment or otherwise ensuring that security at the metering point is adequate to protect against such interference. 

4.5.5.2 If a WESM Memberhas reason to believe that the metering installationhas been interfered with or the accuracy thereof might have been affected by any tampering, he shall inform the Metering Services Providerwho shall test the metering installationto ensure that the metering equipmentoperates within the applicable accuracy parameters described in the Grid Codeand Distribution Code. 

4.5.5.3 If evidence of tampering with a metering installation is found or discovered by a WESM Member, all affected Participantsshall be notified of that fact by that WESM Memberand the PEM Boardas soon as reasonably possible. 

4.5.5.4 The PEM Auditor, in consultation with the Market Operatorand Metering Services Providers, shall review the security arrangements and requirement of metering installationsannually. 

4.5.6 Security of Metering Data Held in a Metering Installation 

The Metering Services Provider shall ensure that metering dataheld in a metering installation is protected from local or remote electronic access or manipulation of data by the installation of suitable security electronic access controls (including, if required by theMarket Operator,passwords). 

4.5.7 Performance of Metering Installations

4.5.7.1 The Metering Services Provider shall use all reasonable endeavors to ensure that metering datais capable of being transmitted to the metering database from its metering installations: 

(a)           Within the applicable accuracy parameters described in the Grid Code and Distribution Code; and 

(b)           Within the time required for settlement, at a level of availability of at least 99% per annum, or as otherwise agreed between theMarket Operatorand the Metering Services Provider. 

4.5.7.2 If a metering installation malfunction or defect occurs, the Metering Services Provider shall ensure that repairs shall be made as soon as practicable and in any event within two businessdays, unless extended by theMarket Operator. 

4.5.7.3 A WESM Participant who becomes aware of a metering installation malfunction or other defect shall advise theMarket Operatorwithin 3 hours from the time it was detected. 

4.5.8 Meter Time 

4.5.8.1 The Metering Services Provider shall ensure that all metering installationand data loggerclocks are referenced to Philippines Standard Time. 

4.5.8.2 The metering databasetime shall be set within an accuracy of plus or minus five (5) seconds of Philippines Standard Time. 

4.6       METERING DATA 

4.6.1 Changes to Metering Data 

The Metering Services Provider shall not make, cause or allow any alteration to the original stored data in a metering installation. It shall also use reasonable endeavors to ensure that no other person or entity does the same. 

4.6.2 Data Transfer and Collection 

4.6.2.1 The Market Operator shall collect metering data from all metering installations from which metering data is required for settlement purposes unless otherwise agreed by theMarket Operator and theaffected Participants. 

4.6.2.2 Each WESM Member shall use its reasonable endeavors to ensure that theMarket Operator is given access to, or is provided with, the metering data. 

4.6.2.3 The Metering Services Provider shall, at its own cost, ensure that metering data derived from a metering installationfor which it is responsible shows the time and date at which it is recorded and is capable of being transmitted from the meteringinstallation to the meteringdatabase in accordance with theMarket Operator’sreasonable requirements.   

4.6.2.4 The Market Operatormay use data collection systemsto transfer metering datato the metering databases. 

4.6.2.5 Without prejudice to the generality of this clause 4.5, the Metering Services Provider shall ensure that each of its metering installationshave adequate communication facility that will enable theMarket Operator to obtain remote access to the metering datafrom the metering database.  This requirement, however, may be relaxed during the initial operation of the WESM.

4.6.2.6 In cases where the metering installation has no capability to transmit the metering dataelectronically to the metering database, the WESM Participantmust use its reasonable endeavors to ensure that the Market Operatoris given alternative access to, or is provided with, the metering data in accordance with the procedures established under the Grid Codeand Distribution Code. 

4.7       DEREGISTRATION OF METERING SERVICES PROVIDERS 

4.7.1 Settlement with inaccurate metering information 

TheMarket Operatorshall develop a detailed process for settling accounts retroactively to correct incorrect metering information and market settlements that results from meter tampering, meter bypass, meter failure, data loss, unethical conduct, excessive inaccuracy or other causes. 

4.7.2 Sanctions for inaccurate metering information 

The Market Operatorshall develop a process of penalties and sanctions for Meter Services Providers and WESM Participantswhose meter datais incorrect beyond reasonable limits for whatever reason. 

4.7.3 Notice following material breach of WESM Rules 

If a Metering Services Providermaterially breaches the WESM Rules, the Market Operatorshall send to that Metering Services Providernotice in writing setting out the nature of the breach and if the Metering Services Provider remains in breach for a period of more than 7 business days after notice from the Market Operator, the Market Operator may deregister the Metering Services Provider.

4.7.4 Deregistration following unethical act 

The Market Operatormay deregister a Metering Services Providerfor unethical act or behavior. 

4.7.5 Effect of deregistration for unethical act  

If the Market Operatorderegisters a Metering Services Provider in accordance with clause 2.6.2 and subject to clause 2.7, the Market Operator shall:  

(a)  Notify the ERC and the WESM Participantsof this action and basis for decision; and  

(b)  Publish details of the deregistration.  

            4.8      DATABASES 

4.8.1 Installation Databases 

4.8.1.1 The Metering Services Providershall create, maintain and administer aninstallation databasein relation to all its metering installations. 

4.8.1.2 The Metering Services Providershall ensure that each affected Participantand the Market Operator is given access to the information in its installation databaseat all reasonable times and: 

(a)       In the case of data sixteen months old or less, within seven business days of receiving written notice from the person or entity seeking access; and 

(b)       In the case of data more than sixteen months old, within thirty days of receiving written notice from the person or entity seeking access. 

4.8.1.3 The Metering Services Providershall ensure that its installation databasecontains the information specified in Appendix B2. 

4.8.2 Metering Database 

4.8.2.1 The Market Operatorshall create, maintain and administer a metering database,which shall include a metering register containing information for each metering installationregistered with theMarket Operator. 

4.8.2.2 The metering databaseshall include metering data, energy data, data substituted in accordance with this clause 4.7 and all calculations made for settlementpurposes. 

4.8.2.3     Data shall be stored in the metering database:

(a)           For 16 months in accessible format; and

(b) For 10 years in archive. 

4.8.3 Rights of Access to Metering Data 

The only entities entitled to have either direct or remote access tometering dataon a read only basis from the metering databaseor the metering registerin relation to a metering point are: 

(a)          Each Trading Participantwhose settlement amounts are determined by reference to quantities of energyflowing through that metering point;

(b)          The Metering Services Provider who is responsible for the metering installation at that metering point; 

(c)           A Network Service Provider associated with the metering point; 

(d)          TheMarket Operator and its authorized agents; and 

(e)          Any Customerwho purchases electricity at the associated connection point;

(f)            The Market Surveillance Committee; and

(g)             The ERC. 

4.8.4 Confidentiality 

Subject to clause 4.7.3, metering datais confidential and each WESM Member and Metering Services Provider shall ensure that such data is treated as confidential informationin accordance with the WESM Rules. 

4.8.5 Payment for Access to Metering Data 

All reasonable costs (including, without limitation, telecommunications charges) incurred by the Metering Services Provider in providing access to metering data at a metering installation or by the Market Operator in providing access to information in the metering database shall be paid by the WESM Member to whom the metering data or information was provided.

            4.9      DATA VALIDATION AND SUBSTITUTION 

TheMarket Operator is responsible for the validation and substitution of metering data after being furnished settlement-ready metering databy the Metering Services Provider and shall develop data validation procedures in consultation with WESM Participants and in accordance with Appendix C1.2 (d). 

4.10 PROCESSES AND REVIEW 

The Market Operatorshall undertake a periodic review of the provisions of this chapter 4 in accordance with the public consultation procedures, including but not limited to: 

(a)          New technologies and the impact of new technologies on and in relation to technical standards for metering in the WESM Rules, the Grid Codeand Distribution Code; 

(b)          Contestability in the provision and types of metersused; and 

(c)           Whether the provisions of this chapter 4 have the effect of eliminating the use of alternative types of meters. 

4.11 TRANSITORY PROVISION 

During the initial operation of the WESM, the TRANSCOshall provide the services required of the Metering Services Provider, but this shall not exclude other entities from doing the same, provided they meet the requirements provided herein. 

CHAPTER 5 

MARKET INFORMATION AND CONFIDENTIALITY 

5.1       SCOPE OF CHAPTER 5 

This chapter 5 sets out: 

(a)          Procedures for dealing with spot market information, including: 

(1)  Systems and procedures for the provision and storage of spot market information; and 

(2)  A requirement to audit spot market information; and 

(b)          Procedures for dealing with confidential information, including 

(1)  Exceptions to the general rule that confidential informationshall not be disclosed; and 

(2)  Conditions of disclosure of confidential information.

5.2      MARKET INFORMATION AND CONFIDENTIALITY 

5.2.1 Provision of Information 

5.2.1.1 The provisions of this chapter are always subject to the rights and obligations of theMarket Operator and WESM Members in relation to confidential information as set out in clause 5.3. 

5.2.1.2 In addition to any specific obligation of theMarket Operatorunder the WESM Rules to provide information, theMarket Operator:  

(a)           Shall, upon written request, make available to Trading Participantsany information concerning the operation of the spot market provided that said information is not confidential or commercially-sensitive; and  

(b)           May charge a fee reflecting the cost of providing such information. 

5.2.1.3 TheMarket Operatorshall make public and electronically post information on the market priceas well as reasons for any significant movement thereon and provide hard copies of such informational materials upon request and reimbursement of cost to produce the same. 

5.2.1.4 The Market Operatorshall make available to the ERCall pertinent information which would help the latter effectively perform its regulatory and oversight functions. 

5.2.1.5 The Market Operatorshall make available to the DOEall pertinent information which would help the latter effectively perform its energy policy-making function. 

5.2.2 Systems and Procedures 

5.2.2.1 Information required, covered or otherwise contemplated by the WESM Rulessuch as those provided by WESM Membersto the

Market Operatoror those provided by theMarket Operatorto WESM Membersshall be provided by means of an electronic communication systemunless the WESM Rulesspecify otherwiseor changed or modified by theMarket Operator. 

5.2.2.2 Information provided by means of an electronic communication system shall be in accordance with the templates included in the said electronic communication systemunless otherwise changed or modified by theMarket Operator as approved by the PEM Board. 

5.2.2.3 As far as practicable, the Market Operatorshall incorporate a binding acknowledgement receipt in its electronic communication systemwhich would establish the time the pertinent information is actually received. 

5.2.2.4 Information is deemed to be publishedby theMarket Operator when the information is posted on the market information website. 

5.2.2.5     TheMarket Operator shall maintain and publishelectronic communication procedures under which: 

(a)           Information shall be provided by WESM Membersto theMarket Operator; 

(b)           Information shall be provided by theMarket Operatorto WESM Members; and  

(c)           Information publishedon the market information website may be accessed by Trading Participants.  

5.2.2.6     From time to time, the Market Operator, in consultation with WESM Members, may review and alter:  

(a)           The requirements for electronic communication systems; and 

(b)           Electronic communication procedures.  

5.2.2.7 The Market Operatorshall provide the ERCand DOEall necessary facilities to effectively monitor the operation of the WESM, on realtime and for review purposes. 

5.2.3 Participant Data 

TheMarket Operatorshall maintain, periodically update as it considers reasonably necessary from time to time and publish: 

(a)          A list of all WESM Membersidentifying those of them that are Trading Participants;  

(b)          A list of all membership applicants to the WESM andidentifying those applying to become a Trading Participant; 

(c)           A list of all former WESM Membersand the time that each ceased to be WESM Members; and 

(d)          A list of all suspended Trading Participantsand the time at which each was suspended. 

5.2.4 Planning and Design Data 

5.2.4.1 Consistent with the Grid Code, the System Operator is to maintain a register of data provided by Trading Participants and Network Service Providers for planning and design purposes.  

5.2.4.2 The System Operator shall provide on a regular basis a copy of the register of data prepared under clause 5.2.4.1 to the Market Operator in a form specified by the Market Operator. 

5.2.5 Information Records 

The Market Operator shall retain all information provided to it under the WESM Rulesfor at least ten years in a form it deems appropriate for reasonable access as may be required by the ERC or the DOE. 

5.2.6 Market Audit 

5.2.6.1 The Market Operator shall arrange for a spot marketaudit to be performed once each quarter, or such other period as determined by the Market Operatorin consultation with the PEM Auditor. 

5.2.6.2 The spot marketaudit shall cover and review compliance by theMarket Operator with its procedures and the effectiveness and appropriateness of systems utilized in the operation of the spot market,including but not limited to: 

(a)     Valid audit certificates for the current versions of all numeric software;  

(b)     The calculations and allocations performed by the metering and settlements systems;

(c)     Billing and information systems; 

(d)     The scheduling and dispatchprocesses; 

(e)     The processes for software management; and 

(f)       TheMarket Operator’s compliance with the WESM Rules. 

5.2.6.3 The PEM Auditor shall prepare a report on the results of the spot market audit. 

5.2.6.4 Following consideration by theMarket Operator, the spot market audit report shall be made available by theMarket Operator to the ERC, the PEM Board and WESM Members.

            5.3      CONFIDENTIALITY 

5.3.1 Confidentiality 

5.3.1.1 Each WESM Member and theMarket Operator shall keep confidential any confidential informationwhich comes into their control, possession or otherwise be aware of. 

5.3.1.2          A WESM Memberand theMarket Operator: 

(a)           Shall not disclose confidential informationto any person or entity except as permitted by the WESM Rules; 

(b)           Shall only use or reproduce confidential informationfor the purpose for which it was disclosed or for a purpose contemplated by the WESM Rules; and 

(c)           Shall not permit unauthorized persons to have access to confidential information. 

5.3.1.3 Each WESM Member and theMarket Operatorshall use all reasonable endeavors to: 

(a)           Prevent             unauthorized  access             to        confidential information which is in its possession or control; and 

(b)           Ensure that any person to whom it discloses confidential information observes the provisions of this clause 5.3 in relation to that information. 

5.3.2 Exceptions 

Subject to clause 5.3.3.1, this clause 5.3 does not prevent:  

(a)         The disclosure of information (confidential or otherwise) between any one or more of the following: 

(1)           The ERC and theDOE; 

(2)           The System Operator; 

(3)           The Market Surveillance Committee; and 

(4)           Any other person or entity, including but not limited to a committee appointed by the PEM Boardin accordance with the WESM Rules, 

for the purposes of: 

(5)           The operation, security and planning of the power systemin accordance with the Grid Code;

(6)           Complying with any other instrument (including any contractual instrument or understanding governing the relationship between the parties detailed in clauses 5.3.2 (a) (1) to (a) (5));and  

(7)           Any other circumstance which, in the reasonable opinion of the Market Operator, is necessary to assist the Market Operator in establishing and operating the WESM in accordance with the WESM objectives; 

(b)         The disclosure, use or reproduction of information if the relevant information is at that time generally and publicly available other than as a result of a breach of this clause 5.3; 

(c)         The disclosure of information by a WESM Member or theMarket Operator, or by persons to whom the WESM Member or theMarket Operator(as the case may be) has disclosed that information to such as: 

(1)           An employee or officer of the WESM Member; or 

(2)           A legal or other professional adviser, auditor or other consultant of the WESM Memberor theMarket Operator

(as the case may be); or

(3)     Similar persons or entities, for purposes of complying with the WESM Rules, or advising the WESM Member or theMarket Operatorin relation to the WESM Rulesproved that the person receiving the information undertakes in writing  not to further disclose that information to any other person; 

(d)         The disclosure, use or reproduction of information with the written consent of the person or persons who provided the relevant information under the WESM Rules;

(e)         The disclosure, use or reproduction of information to the extent required by law or by a lawful requirement of: 

(1)           The ERCand the DOE; or 

(2)           Any government authority having jurisdiction over a WESM Memberor theMarket Operator; 

(f)          The disclosure, use or reproduction of information if necessary in accordance with the lawful requirements of or in connection with legal proceedings, arbitration, expert determination or other dispute resolution mechanisms relating to the WESM Rules, or for the purpose of advising a person in relation thereto provided that those to whom the information is disclosed undertakes in writing not to further disclose that information to any other person; 

(g)         The disclosure of information to the extent required to protect the safety of personnel or equipment; 

(h)         The disclosure, use or reproduction of information by or on behalf of a WESM Memberor theMarket Operatorto the extent reasonably required in connection with the WESM Member's or theMarket Operator’sfinancing arrangements (as the case may be), investment in a WESM Member or a disposal of a WESM Member's assets provided that those to whom the information is disclosed signs a written undertaking not to further disclose that information to any other person; 

(i)          The disclosure of information to the ERC andDOEand any other government authority having jurisdiction over a WESM Member, pursuant to the WESM Rules or otherwise. 

5.3.3 Conditions 

5.3.3.1 Any entity who receives information disclosed in accordance with clause 5.3.2 (a): 

(a)           Shall not disclose the information to any person, except as provided  by the WESM Rules; and 

(b)           Shall only use the information for the purposes for which it was disclosed under clause 5.3.2(a). 

5.3.3.2 In the case of a disclosure under clause 5.3.2(c), 5.3.2(f) or 5.3.2(i), the WESM Member or theMarket Operator(as the case may be) who wishes to make the disclosure, shall prior to making the disclosure, inform the proposed recipient of the information that it is confidential information and shall take appropriate precautions, including at the very least securing a written undertaking from the recipient that such recipient will keep the information confidential to ensure that the recipient keeps the information confidential in accordance with the provisions of this clause 5.3 and does not use the information for any purpose other than that permitted under clause 5.3.2. 

5.3.4    Indemnity to the Market Operator 

Each WESM Member indemnifies theMarket Operatoragainst any claim, action, damage, loss, liability, expense or outgoing which theMarket Operatorpays, suffers, incurs or is liable for in respect of any breach of this clause 5.3 by that WESM Member or any officer, agent or employee of that WESM Member: Provided that no WESM Participantshall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Market Operator. 

5.3.5    Survival 

Notwithstanding any other provision of the WESM Rules, a person shall continue to comply with this clause 5.3 after that person has ceased to be a WESM Member. 

5.3.6    The Market Operator Information 

TheMarket Operatorshall develop and, to the extent practicable, implement a procedure approved by the PEM Boardto: 

(a)           Protect information which it acquires pursuant to the Market Operator functions from use or access which is contrary to the provisions of the WESM Rules;  

(b)           Protect information which is commercially sensitive from use or access by members of the PEM Board who are officers, directors or employees of a WESM Member; and 

(c)           Disseminate such information in accordance with its rights, powers and obligations in a manner, which promotes ease of entry into and the orderly operation of the spot market. 

CHAPTER 6 

INTERVENTION AND MARKET SUSPENSION 

            6.1      SCOPE OF CHAPTER 6 

This chapter 6 sets out: 

(a)        The procedures which shall be established by theMarket Operator, System Operator and WESM Participants to ensure that they are able to take all necessary actions in an emergency; 

(b)        The procedures to be followed by the Market Operator, System Operator and WESM Participants in an emergency; 

(c)         The procedures which are to take effect in the event of a threat to system security; and 

(d)        The circumstances and manner in which the ERC through the Market Operator may interveneor suspend the spot market. 

            6.2      OVERVIEW 

6.2.1 Preparation and Responses 

6.2.1.1 The System Operator is responsible for giving directions and coordinating the actions, which are to be taken by WESM ParticipantsandMarket Operatorwhen there is market suspensionor intervention.   

6.2.1.2 Interventionis warranted when the gridis in extreme state condition as established in the Grid Codearising from:  

(a)         An emergency;

(b)         A threat to system security; or

(c)       An event of force majeure. 

6.2.1.3 During intervention or market suspension, the System Operatorand Market Operatorshall coordinate their actions to restore normal operation of the power system and the market. 

6.2.1.4 WESM Participantsacknowledge that: 

(a)       The operation of the power systeminvolves risks to public safety and property and therefore accept that the provisions of this chapter 6 are appropriate and reasonable; 

(b)       Their business interests will be subordinate to the need for the Market Operatorand System Operator to implement emergency procedures in accordance with the Grid Code

and clause 6.3.2 and to make declarations and issue emergency directionsunder clause 6.5 in an emergency;  

(c)       Subject to clause 6.2.1.1, the System Operatorshall issue emergency directionsin accordance with the Grid Code, and shall report such action to the Market Operator. 

6.2.2 Exemption from Liability due to Market Suspension and Intervention 

6.2.2.1 In the events of market suspensionor intervention, any action of the ERC, Market Operator, System Operatoror a WESM Participantin compliance with the emergency procedures provided in this Chapter shall not constitute a breach of the WESM Rules, except in the case of an act committed in bad faith or gross negligence shall not be liable for any loss incurred by a WESM Participantas a result of any action taken by the System Operatoror Market Operatorunder this chapter 6.  

6.2.2.2 Nothing in this chapter 6 is to be taken to limit the ability of the System Operatoror Market Operatorto take any action or procedure under this chapter 6 which either the System Operatoror Market Operator considers in their absolute discretionto be necessary to protect the public or property. 

6.2.3 Administered Price Cap 

During market suspensionand intervention, the Market Operatorshall impose an administered price capto be used as basis for settlements. 

Prior to the spot market commencement date, the Market Operatorshall develop and publish an administered price capto be used during market suspensionor intervention of the spot market.   Said administered price capis to be endorsed by the PEM Boardfor ERCapproval.  

6.3       EMERGENCIES 

6.3.1 Emergency 

6.3.1.1 The System Operator shall declare an emergency when itdetermines the existence of a situation which has an adverse material effect on electricitysupply or which poses as a significant threat to system security.  The System Operatorshall report an emergencyto the ERC. 

6.3.1.2 An emergencymay include: 

(a)           A significant electricity supplycapacity shortfall, being a condition where there is insufficient generation or supply options available to securely supply in one or more regions of the power system likely to be affected by the event; 

(b)           A power systemdisturbance due to an outage in the  transmission networkor generating system for which market processes are inadequate for recovery; 

(c)           A significant environmental phenomenon, including weather, storms or fires which are likely to or are significantly affecting the power system for which market processes are inadequate for recovery; 

(d)           A system blackoutor significant power system undervoltage condition; 

(e)           Material damage to a distribution system which has or is likely to adversely affect the operation of the transmission systemor to render the spot market ineffective; and 

(f)            A situation, which the Government proclaims or declares an emergency. 

6.3.1.3 A WESM Participant shall notify the System Operator as soon as practicable of: 

(a)           Any event or situation of which the WESM Participant becomes aware where, in the reasonable opinion of the WESM 

Participant, that event or situation is of a kind described in clause 6.3.1.2; and 

(b)           Any action taken by the WESM Participant under its safety proceduresor otherwise in response to that event or situation, in accordance with the Grid Code and Distribution Code.

6.3.1.4 The System Operator may, from time to time, specify procedures for communicating the existence of an emergency and all relevant information relating to the emergency to the WESM Participants. 

6.3.1.5 Notwithstanding any other provision contained in these Rules, the ERC,DOE or the PEM Boardmay investigate or require explanations regarding an emergency direction given by the System Operator.  

6.3.1.6 Each WESM Participant shall use its best endeavors to ensure that its safety plan permits it to comply with emergency directions. 

6.3.1.7 When the System Operatorhas determined that an emergency or the effect thereof has ended,the System Operatorshall notify the Market Operator who in turn shall notify all WESM Participants andthe DOEthat the emergency or the effect of such emergencyhas ended. 

6.3.2 Emergency Procedures 

6.3.2.1 During the period when the power systemmay be or is affected by anemergency the System Operatorshall carry out actions, in accordance with the system securityand reliability guidelinesand its obligations (if any) concerning sensitive loadsto: 

(a)           Identify the impact of the emergency on system security in terms of the capability of generating units,transmission systems or distribution systems; and 

(b)           Identify and implement the actions required to restore the power system to its satisfactory operating state. 

6.3.2.2 Emergency proceduresare the procedures to be taken by or at the direction of the System Operator to:

(a)           Maintain system security; 

(b)           Avert or reduce the effect of an emergency; 

(c)           Issue notifications and warnings to Market Operator, the PEM Board, the DOEand ERCwhere appropriate; and 

(d)           Restore the power system to a satisfactory operating stateimmediately after an emergency. 

6.3.2.3 Emergency proceduresmay require a WESM Participant to take action, or not to take action, in accordance with emergency directionsgiven by the System Operator. 

6.3.2.4 Prior to spot market commencement date, theSystem Operatorin consultation with the Market Operatorshall: 

(a)   Develop appropriate emergency procedures in accordance with the Grid Codeand Distribution Code.  Such procedures shall be subject to approval of the PEM Board; and 

(b)   Publishdetails of the approved emergency procedures. 

6.3.2.5 The System Operator shall, in consultation with the Market Operator, review the emergency procedures from time to time. 

6.3.2.6 Each WESM Member shall promptly:  

(a)           Comply with any emergency direction given by the System Operator, including emergency directions requiring the disconnectionof equipment from a transmission system ordistribution system for reliability purposes, unless the WESM Participant reasonably believes that an emergency direction given by the System Operator poses a real and substantial risk of damage to its equipment, to the safety of its employees or the public, or of undue injury to the environment; 

(b)           Notify the System Operatorif it intends not to follow the emergency direction for any of the reasons described in clause 6.3.2.6 (a); and 

(c)           Comply with the System Operator’s direction to the fullest extent possible without causing the harms described in clause 6.3.2.6 (a). 

6.3.2.7 The System Operatorshall make available a copy of the emergency procedures to all WESM Participantswithin seven (7) days after each occasion on which the emergency procedureshave been updated. 

            6.4      EMERGENCY PLANNING BY WESM PARTICIPANTS 

6.4.1 WESM Participant Emergency Contacts 

6.4.1.1 Each WESM Participantshall provide the Market Operator and System Operator with: 

(a)           An effective means of communication by which a representative of the WESM Participantmay be contacted by the Market Operator24 hours a day; and 

(b)           The name and title of the WESM Participant's representative who can be contacted by using that means of communication.  

6.4.1.2 The representative of each WESM Participant nominated under clause 6.4.1.1 shall be a person having appropriate authority and responsibility within the WESM Participant’sorganization to act as the primary contact for the System Operatorin the event of an emergency. 

6.4.1.3 Each WESM Participant shall immediately notify the Market Operator and System Operator of a change to the details provided under clause 6.4.1.1. 

6.4.2 WESM Participant Procedures 

6.4.2.1 Each Trading Participantand Network Service Provider shall establish and maintain its own internal safety proceduresnecessary to enable it and, its Customers, to comply with emergency directions under this chapter.

6.4.2.2 Each Trading Participantand Network Service Provider shall ensure that the safety proceduresit establishes under clause 6.4.2.1 are consistent with the emergency procedures established under clause 6.3.2.4 and the Grid Code. 

6.4.3 Emergency Procedures Awareness 

6.4.3.1 Each Trading Participantshall at all times ensure that all of its responsible officers and staff and their Customers, are familiar with both the safety and the emergency procedures. 

6.4.3.2 For the purposes of clauses 6.4.3.1 and 6.5.1, responsible officers and staff are those whose functions or areas of responsibility are such that they are likely to be required to make decisions or take action in an emergency.

6.5       RESPONSE TO AN EMERGENCY 

6.5.1 Declarations and Directions in an Emergency 

6.5.1.1 During an emergency:

(a)           The System Operator shall, in coordination with the Market Operator,issue emergencydirections as it reasonably considers necessary, which may include, but need not be limited to, directions to: 

(1)  Switch off, or re-route, energy delivery from a Generation Company; 

(2)  Call equipment into service; 

(3)  Take equipment out of service; 

(4)  Commence operation or maintain, increase or reduce activeor reactive power output; 

(5)  Curtail, shut down or otherwise vary operation or output; 

(6)  Shed or restore load; and 

(7)  Subject to clause 6.8, do any other act or thing necessary to be done for reasons of public safety or the security of the power system or of undue injury to the environment. 

(b)           The System Operator shall also:  

(1)  Implement any load sheddingin a manner consistent with the system security and reliability guidelines;and 

(2)  To the extent possible and in accordance with the Market Operator’s responsibility in relation to vital loads, determine a rotating outage plan, and rotate any load shedding requirements. 

6.5.1.2 When an emergencyarises, the System Operatorshall: 

(a)           Immediately notify the Market Operator;  

(b)           Notify the ERCand the DOE, as soon as reasonably practicable; 

(c)           Notify WESM Participants,as soon as reasonably practicable, of the commencement, nature, extent and expected duration of the emergencyand the way in which the System Operator reasonably anticipates it will act in response to the emergency; and  

(d)           Notify the ERC,the DOE, and WESM Participants of any material changes in the nature, extent and expected duration of an emergency. 

6.5.1.3 Upon being notified of an emergency, each WESM Participantshall advise all responsible officers and staff (as defined in clause 6.4.3.2) and their Customers,  of the existence and nature of the emergency. 

6.5.1.4 Each WESM Participantshall, subject to clause 6.5.1.5: 

(a)           Comply with safety procedures,the emergency procedures applicable to the WESM Participantin the circumstances, this chapter, and all emergency directions given by the System Operator; and  

(b)           Cooperate with the Market Operatorand the System Operatorto enable the System Operatorto implement the emergency procedures. 

6.5.1.5 Where there is conflict between these Rules and: 

(a)           The requirements of a WESM Participant’s safety procedures; 

(b)           The emergency procedures applicable to the WESM Participantin the relevant circumstances; 

(c)           This chapter; 

(d)           Any procedures developed by the System Operator; or (e) An emergency direction given by the System Operator, the System Operatorshall decide which of those requirements or part of those requirements is to prevail and advise the relevant WESM Participantsaccordingly.  

6.5.2 Intervention Due to Emergency 

6.5.2.1 If, in the best judgment of the System Operator,insufficient time exists for the spot market to address an emergency,the System Operator shall take any measures it considers to be reasonable and necessary to overcome the emergency,including without limitation: 

(a)           Increase the generationor supply capability such as requesting available but not committed generating units to start-up, or recall transmissionequipment outages; 

(b)           Disconnectone or more connection points as considered by the System Operatorto be necessary;  

(c)           Direct, in accordance with clause 6.5.1, a Customer to take such steps as are reasonable to immediately reduce its load;  

(d)           Constrain-onor constrain-offa Generation Company; and 

(e)           RequireWESM Participants to do any reasonable act or thing which, the System Operator believes necessary in the circumstances. 

Thereafter, the System Operator shall report in detail to the PEM Board in detail regarding the actions and circumstances under which the interventionwas made. 

6.6       SYSTEM SECURITY 

6.6.1 System Security and Reliability Guidelines 

6.6.1.1 In consultation with WESM Participantsand the Market Operator, the System Operatorshall develop and periodically update system security and reliability guidelines, subject to approval of the PEM Board. 

6.6.1.2 The system security and reliability guidelinesdeveloped under clause 

6.6.1.1 shall be provided to: 

(a)           The ERC and the DOE on completion and after any update thereon; 

(b)           WESM Participants; and 

(c)           Interested persons upon request. 

6.6.1.3 If theSystem Operator proposes a change to the system security and reliability guidelines which, in theSystem Operator’s reasonable opinion, is a material change then, prior to its implementation, that proposed change shall be reviewed in accordance with the Grid Code andDistribution Code. 

6.6.2 Notice of Threat to System Security 

6.6.2.1 Upon determination of the existence or the likely possibility of a threat to system security, the System Operatorshall without delay notify the WESM Participants and the Market Operatorof such threat.  Said notice shall include the details of that threat as well as: 

(a)     The nature and general magnitude of the threat to system security, including an estimate of the likely duration thereof,and the likely shortfall in supply, likely to occur during that period; 

(b)     The timeframe, in which, the System Operator will need to intervenein the spot market if the threat to system security does not subside withoutinterventionby the System Operator; and 

(c)     The regions of the power system in which the threat to system security is likely to be located.  

6.6.2.2 If the System Operator provides the notice with details of a threat to system security to WESM Participants,in accordance with clause 6.6.2.1, the System Operator may issue instructions, requiring each WESM Participant to provide best estimates of the following: 

(a)     AScheduled Generation Company’splant availability to either increase or decrease generation; and 

(b)     ACustomer’sability to either increase or decrease market load. 

6.6.2.3 Despite clause 5.3, a WESM Participant shall not withhold information required by the System Operator in accordance with clause 6.6.2.2.   The WESM Participantshall comply with the instructions and provide the information required as soon as practicable. 

6.6.2.4 The System Operator shall treat all information provided to it by a WESM Participant under clause 6.6.2.2 asconfidential information and may only use that information for the following purposes: 

(a)     Maintaining or re-establishing system security by issuing emergency directions under clauses 6.6.4 and 6.6.5; 

(b)     Making a decision under clause 6.6.3; and (c) Regulatory reporting. 

6.6.2.5 The System Operator shall inform WESM Participants and the Market Operator immediately when it reasonably considers a threat to system security to be at an end. 

6.6.3 Response to System Security Threat 

6.6.3.1 If the System Operator has identified a threat to system security and reasonably considers that sufficient time exists for the threat to subside without intervention,the System Operator shall, in accordance with the procedures set out in clause 6.6.4, facilitate a spot marketresponse to overcome the threat to system security.

6.6.3.2 If the System Operator has identified a threat to system security and it does not believe that sufficient time exists for the threat to subside without interventionthen the System Operator shall:  

(a)           Take any measures it believes to be reasonable and necessary to maintain or restore system security including those set out in clause 6.6.5; and 

(b)           Act at all times in accordance with the system security and reliability guidelines.

6.6.4 Market Response to Threat to System Security 

6.6.4.1 If the System Operator believes that sufficient time exists for a threat to system security to subside withoutintervention,the System Operator shall:

(a)           If it has not already done so, provide WESM Participants with the information set out under clause 6.6.2.1; and 

(b)           Advise the Market Operatorand those WESM Participants who the System Operator considers would be required to take action or cease taking action if the threat to system security is not resolved without interventionof the following information:  

(1)  The existence of the threat to system security; and 

(2)  The likely nature of any requirement of the Grid Operatorif the System Operatordetermines that it should intervene. 

6.6.4.2 The action or cessation of action required under clause 6.6.4.1(b) may include, but is not limited to, changes by the Market Operatorto thepre-

dispatch schedule affecting scheduled generating units, schedule network services and/or scheduled load. 

6.6.4.3 The Market Operatormay:  

(a)           Invite Trading Participants to revise or re-bid their physical capabilities submitted by such Trading Participants in accordance with clause 3.4 in respect of the relevant trading interval; and 

(b)           Notify all Trading Participants of significant changes to the information provided under this clause 6.6.4. 

6.6.4.4 WESM Participants shall comply with all requests and directions issued by the Market Operator under this clause 6.6.4. 

6.6.5 Intervention Due to System Security Threat 

6.6.5.1 If, in the best judgment of the System Operator,insufficient time exists for the spot market to address a threat to system security,the System Operator shall take any measures it considers to be reasonable and necessary to overcome the threat to system security,including without limitation: 

(a)           Increase the generationor supply capability such as requesting available but not committed generating units to start-up, or recall transmissionequipment outages; 

(b)           Disconnectone or more connection points as considered by the System Operatorto be necessary;  

(c)           Direct, in accordance with clause 6.5.1, a Customer to take such steps as are reasonable to immediately reduce its load;  

(d)           Constrain-onor constrain-offa Generation Company; and 

(e)           RequireWESM Participants to do any reasonable act or thing, which the System Operator believes necessary in the circumstances. 

6.6.5.2 Thereafter, the System Operator shall report in detail to the PEM Board in detail regarding the actions and circumstances under which the interventionwas made. 

6.7       FORCE MAJEURE 

6.7.1 Force majeure event 

A force majeure is the occurrence in a trading interval of an event or events not within the reasonable control, directly or indirectly, of the Market Operator and WESM member, to the extent that such event,  despite the exercise of the reasonable diligence, cannot be or be caused to be prevented, or removed and has resulted in a reduction in the normal capacity of part or all of the power transmission system during that trading interval and such reduction is likely to materially affect the operation of the spot marketor materially threaten system security.   

6.7.2 Force majeure event 

Events of force majeureshall include: 

(1)  Major network trouble that caused partial or system-wide blackout; 

(2)  Market system hardware or software failure that makes it impossible to receive or process market offer/bid information or dispatch the system in accordance with the WESM Rules; and 

(3)  Any other event, circumstance or occurrence in nature of, or similar in effect to any of the foregoing. 

6.7.3 Notification 

6.7.3.1 The WESM Participantshall notify the Market Operatoras soon as reasonably possible of the occurrence of any force majeureevent. 

6.7.3.2 The Market Operatorshall notify all Trading Participants as soon as reasonably possible of the nature of the force majeureand the extent to which the force majeureaffects the operation of the spot market. 

6.7.4 Obligations of WESM Participants 

WESM Participants shall use all reasonable endeavors to: 

(a) Ensure that they do not cause or exacerbate a force majeure event; and (b)          Mitigate the occurrence and effects of a force majeure event. 

            6.8      MARKET SUSPENSION 

6.8.1 Conditions for Suspension of the Market 

6.8.1.1 Pursuant to Section 30 of the Act, the ERCshall suspend the operation of the spot marketor declare a temporary wholesale electricity spot marketfailure in cases of: 

(a)           Natural calamities; or 

(b)           Following official declaration of a national and international security emergency by the President of the Republic. 

6.8.2 Declaration of Market Suspension 

6.8.2.1 The spot marketcan only be suspended by a declaration by the ERCunder clause 6.8.1.1 and if the spot marketis suspended: (a) The ERC shall notify the Market Operator; and 

(b)     The Market Operatorshall notify all WESM Participants, as soon as possible. 

6.8.2.2 The spot marketis deemed suspended at the start of the trading intervalin which the ERC advises the Market Operatorthat the spot marketis suspended. 

6.8.2.3 Following a declaration by the ERCunder clause 6.8.1.1, the spot marketis to remain suspended until the ERC notifies the Market Operatorthat spot marketoperation is to resume. 

6.8.2.4 The Market Operator shall promptly notify all WESM Participants that spot market operation is to resume and the time at which spot market operation is to resume. 

6.8.2.5 Notwithstanding a suspension of the spot market, the Market Operatormay issue emergency directionsto WESM Participants in accordance with clause 6.5.1. 

6.8.3 Effect of Market Suspension 

6.8.3.1 The market priceduring a trading intervalin which the ERChas declared the spot marketto be suspended and up to the time that the market resumes in accordance with 6.8.2.4 is to be determined by the Market Operatorin accordance with clause 6.2.3. 

6.8.3.2 During a trading intervalin which the spot market is suspended, the WESM Ruleswill continue to apply with such modifications as the Market Operator reasonably determines to be necessary, taking into consideration the circumstances and conditions giving rise to the decision by the ERC to suspend the spot market. 

6.8.4 Intervention Report 

6.8.4.1 Upon the concurrence of one or more of the following events:  

(a)           An intervention;

(b)           An event which, in the System Operator’sreasonable opinion, is or may be a threat to system security; 

(c)           A force majeure event; or (d)      An emergency, 

the PEM Boardshall, within ten days thereof, direct the Market Surveillance Committeeto investigate the circumstances of that event and prepare a report to assess: 

(a)           The adequacy of the relevant provisions of the WESM Rulesin relation to the event or events which occurred; 

(b)           The appropriateness of actions taken by the System Operatorand the Market Operator in relation to the event or events which occurred; 

(c)           The costs incurred by WESM Members as a consequence of responding to the event or events; and 

(d)           Any finding of potential, fault of any WESM Participantincluding a preliminary recommendation for further evaluation by the PEM Auditor. 

6.8.4.2 A copy of the report prepared under clause 6.8.4.1 shall be provided to: 

(a)           The PEM Board; 

(b)           The ERC and the DOE; and 

(c)           WESM Participantsand interested persons on request. 

6.8.5 Market Suspension Report 

6.8.5.1 Within ten business days following a declaration by the ERC under clause 6.8.1.1, the Market Surveillance Committee shall investigate the circumstances of that event and prepare a report to assess: 

(a)           The adequacy of the provisions of the WESM Rulesrelevant to the event or events which occurred; 

(b)           The appropriateness of actions taken by the Market Operator in relation to the event or events which occurred; and 

(c)           The costs incurred by the WESM Members as a consequence of responding to the event or events.

6.8.5.2 A copy of the report prepared under clause 6.8.5.1 shall be provided to: 

(a)           The PEM Board; 

(b)           The ERC and the DOE on completion of the report; and

(c)           WESM Participantsand interested persons on request. 

CHAPTER 7 

ENFORCEMENT AND DISPUTES

7.1       SCOPE OF CHAPTER 7 

In line with the principles of self-governance, expeditious, just and least expensive disposition of disputes and considering the continuous nature of the transactions and operations of the WESM, this chapter sets out: 

(a)         The responsibilities for ensuring that all WESM Members comply with the WESM Rules; 

(b)         The procedures on how the alleged breaches will be dealt with including:  

(1)   The correct party to whom notice of an alleged breach of the WESM Rulesby a WESM Member shall be given; 

(2)   The manner in which an alleged breach is to be investigated; 

(3)   The manner in which a breach is to be sanctioned; and 

(c)         Other provisions on how disputes are to be resolved, including the appointment of a Dispute Resolution Administrator and Dispute Resolution Panel. 

7.2       ENFORCEMENT 

7.2.1 Compliance 

The PEM Board, in consultation with the Market Operator and the System Operator, shall do all things reasonably necessary to ensure that all WESM Members comply with the WESM Rules.  

7.2.2 Breaches of the WESM Rules by WESM Participants 

7.2.2.1 If a WESM Member or the Market Operator has reasonable grounds to believe that another WESM Membermay have committed or may be committing a breach of the WESM Rules,the WESM Member or the Market Operator shall notify the PEM Boardof the alleged breach in writing as soon as possible. 

7.2.2.2 The PEM Boardshall direct the Disputes Resolution Administratorto investigate the alleged breach as soon as possible, when: 

(a)           A WESM Memberor the Market Operatornotifies the PEM Boardof an alleged breach of the WESM Rulesin accordance with clause 7.2.2.1; or 

(b)           The PEM Boardhas a reasonable ground to believe that the WESM Memberhas committed or is committing an act probably in violation of the WESM Rules. 

7.2.2.3 The Disputes Resolution Administratorshall issue a written notice to the WESM Member who is alleged to be in breach of the WESM Rules within five calendardaysupon receipt of notice from the PEM Board. 

7.2.2.4 The said notice issued by the Disputes Resolution Administrator shall:

(a)           Specify the nature of the breach and the sanctions that may be imposed if the breach is not remedied; 

(b)           Require the WESM Memberto explain in writing the alleged breach within ten (10) calendar days from receipt thereof; and 

(c)           Order the WESM Memberwho is in alleged breach to immediately remedy the act or omission comprising the alleged breach or some other remedial measure, if in the opinion of the Dispute Resolution Administrator, exercising due and necessary diligence, believes that some remedial or preventive measure should be taken to abate the effects of the act or omission complained of; Providedthat(i) complying with the order shall not be deemed as an admission of guilt of the act or omission complained of, and (ii) shall be recognized as a mitigating factor if the complying party is later determined to be in breach. 

7.2.2.5 The notice shall be copy furnished to: 

(a) The PEM Board;and (b) The ERC, within five business days from issuance of notice. 

7.2.2.6 The Disputes Resolution Administratorafter according the parties due process shall determine whether the WESM Member in question is in breach of the WESM Rules. 

7.2.2.7 If the Disputes Resolution Administratordetermines that a WESM Memberhas indeed breached a WESM Rule,the Disputes Resolution Administratorshall require in writing the WESM Member to remedy the breach within a reasonable period of time; Provided that, the period to remedy, as determined by the Disputes Resolution Administrator, shall take in consideration all the attendant circumstances surrounding the breach including the nature and extent of damages or injuries caused as well as the quickest possible time required to correct the breach. 

7.2.2.8 The Disputes Resolution Administrator may further recommend to the PEM Boardthat the WESM Memberdetermined to be in breach be suspended in accordance with clause 3.15.7 if the said Memberhas: 

(a)        Committed such a breach of the WESM Rulesand that the breach cannot be rectified; 

(b)        Continued to breach the WESM Rules over a period of time; or (c) Failed to remedy a breach after it has been required to do so. the Disputes Resolution Administratormay recommend to the PEM Boardfor approval the suspension of the party in breach in accordance with clause 3.15.7. 

7.2.2.9 If the breach is of such a nature that payment of compensation to affected parties is required, the Market Operatoron behalf of the affected party  may make a demand for payment under the WESM Ruleswithout prejudice to the fines and penalties that the ERCmay impose.

7.2.3 Alleged Breaches of the WESM Rules by the Market Operator or System Operator 

7.2.3.1 If a WESM Memberhas reasonable grounds to believe that the Market Operatoror System Operatoris in breach of the WESM Rules, the WESM Member shall notify in writing the PEM Boardof the breach. 

7.2.3.2 If the PEM Boardconsiders that the Market Operatoror System Operatorhas committed a breach of the WESM Rules, the PEM Boardshall direct the Disputes Resolution Administratorto investigate the alleged breach as soon as possible. 

7.2.3.3 The Disputes Resolution Administrator shall issue a written notice to the Market Operator or the System Operatorwithin five business daysupon receipt of notice from the PEM Board. 

7.2.3.4 The notice which the Disputes Resolution Administrator is required to issue under clause 7.2.3.3 shall: 

(a)     Specify the nature of the breach and the sanctions which may be imposed if the breach is not remedied; and 

(b)     Require the Market Operator or the System Operatorto explain in writing the alleged breach within a reasonable period of time.  

7.2.3.5 The notice issued under clause 7.2.3.3 shall be copy furnished to: 

(a)   The PEM Board;and (b)   The ERC.

7.2.3.6 If the breach is of such a nature that payment of compensation to affected parties is required, the PEM Boardon behalf of the affected party may make a demand for payment from the Market Operatoror the System Operatorunder the WESM Ruleswithout prejudice to the fines and penalties that the ERCmay impose.

7.2.3.7 If a breach by the Market Operator is not rectified within a reasonable time from the notice issued under clause 7.2.3.3 or is incapable of rectification, the PEM Board may file a formal complaint to the ERC. 

7.2.4 Investigations 

7.2.4.1 The Disputes Resolution Administratormay request from the WESM Member who is alleged to be in breach of the WESM Rulesall information relating to the breach. 

7.2.4.2 If the Disputes Resolution Administratormakes a request for information under clause 7.2.4.1, it shall provide to the WESM Memberto whom the request is made the reasons for the request. 

7.2.4.3 If a WESM Member fails to comply with a directive or request by the Disputes Resolution Administratorfor information under clause 7.2.4.1, the Disputes Resolution Administratormay request the Market Surveillance Committee to investigate the matter and to prepare a report or such other documentation as the Disputes Resolution Administratormay determine. 

7.2.4.4 A WESM Member shall cooperate with the Market Surveillance Committee to undertake the investigation and to prepare the report or other documentation under clause 7.2.4.3 and shall, at the request of the Market Surveillance Committee, use its best endeavors to ensure that third parties make available such information as the person may reasonably be required for the purpose of the investigation. 

7.2.4.5 In the event that an alleged breach exists, the participant in breach shall bear the cost of the investigation and preparation of the report or other documentation under clause 7.2.4.3.  

7.2.4.6 Any report or other documentation referred to in this clause 7.2.4 may be used in any proceeding under or in relation to the WESM Rulesor for the purpose of commencing any such proceeding. 

7.2.4.7 All information provided under this clause 7.2.4 shall be treated in accordance with clause 5.3. 

7.2.5 Sanctions 

7.2.5.1 The ERCshall have the original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed by the ERCin the exercise of its powers, functions and responsibilities, and over all cases involving disputes between and among participants or players in the energy sector. 

7.2.5.2 In line with the principles stated in clause 7.1, the PEM Boardmay impose sanctions on any participant of the WESMfor breach of any provision of the WESM Rules;  Provided thatthis is without prejudice to the authority of ERCto impose fines and penalties pursuant to Section 46 of the Act. 

7.2.6 Actions by Agents, Employees or Officers of Participants 

The act of omission of any partner, agent, officer, employee or any person acting for or in behalf of a WESM Member or the Market Operator, constituting  a breach of the WESM Rules, shall be considered the act or omission of the WESM Member.

7.2.7 Publication  

Subject to clause 5.3, the Dispute Resolution Administrator shall publisha monthly report setting out a summary for the period covered by the report of all actions and rulings made during that period in relation to the enforcement of the WESM Rules.  

7.3       DISPUTE RESOLUTION 

7.3.1 Application and Guiding Principles 

7.3.1.1 The dispute resolution procedures set out in this clause 7.3 apply to all disputes which may arise between any of the following:  

(a)           The Market Operator; 

(b)           The System Operator; 

(c)           The PEM Boardand its Working Groups except the Dispute Resolution Administrator; 

(d)           WESM Members;  

(e)           IntendingWESM Members; and

(f)            Persons who have been notified by the Market Operator under clause 2.4.6.2 that an application for registration as a WESM Member has been unsuccessful, as to: 

(g)           The application or interpretation of the WESM Rules; or 

(h)           A dispute under or in relation to a contract between two or more persons or entities referred to in clauses 7.3.1.1 (a) to (f) where that contract provides that the dispute resolution proceduresunder the WESM Rules are to apply to any dispute under or in relation to that contract with respect to the application of the WESM Rules; or 

(i)             A dispute under or in relation to the Grid Code, Distribution Codeor other rules and regulations issued by the ERCand DOE under the Act, where such industry code or rules and regulations provide that the dispute resolution procedures under the WESM Rulesare to apply to any dispute under or in relation to that industry code or rules and regulations; or 

(j)             The failure of an entity or entities referred to in clauses 7.3.1.1 (a) to (e) to act or behave in a manner consistent with the WESM Rules; or 

(k)           An obligation to settle payment under the WESM Rules; or 

(l)             The failure of a person referred to in clause 7.3.1.1 (f) to become registered as a WESM Member under chapter 2. 

7.3.1.2 For the avoidance of doubt, the dispute resolution procedures set out in this clause 7.3 apply to disputes between two or more entities from and within each of the categories set out in clauses 7.3.1.1(a) to (e) and (f) as appropriate. 

7.3.1.3 Where a dispute of a kind set out in clause 7.3.1.1 arises, the parties concerned shall comply with the procedures set out in clauses 7.3.2 to 7.3.14 before pursuing any other dispute resolution mechanism, including but not limited to court action in relation to the dispute. 

7.3.1.4 WESM Membersshall comply with the dispute resolution process of the WESM Rulesbefore filing a formal complaint to the ERC. 

7.3.1.5 It is intended that the dispute resolution regime set out in, or implemented in compliance with, the WESM Rulesand described in detail in clause 7.3 should to the extent possible: (a) Be guided by the objectives set out in clause 1.2.2;  

(b)           Be simple, quick and inexpensive; 

(c)           Preserve or enhance the relationship between the parties to the dispute; 

(d)           Take account of the skills and knowledge that are required for the relevant dispute or issue; 

(e)           Observe the rules of law; 

(f)            Place emphasis on conflict avoidance; and 

(g)           Encourage          resolution       of         disputes         without            formal legal representation or reliance on legal procedures. 

7.3.2 Appointment of Dispute Resolution Administrator and Panel Group 

7.3.2.1 The PEM Boardshall appoint a person to act as the Dispute Resolution Administrator. 

7.3.2.2 The Dispute Resolution Administrator shall: 

(a)           Have a detailed understanding and experience of alternative dispute resolution practice and procedures which do not involve litigation; 

(b)           Have the capacity to determine the most appropriate alternative dispute resolution procedures in particular circumstances; 

(c)           Have an understanding of the electricity industry; 

(d)           Has not been employed by any electric power industry 

participant, or a company or body related to or associated with a WESM Participant  at least one year before appointment; and (e) Agrees not to be employed by and does not accept employment with any electric power industry participant, or a company or body related to or associated with a WESM Memberwithin one year after the person ceases to be a Dispute Resolution Administrator.

7.3.2.3 If the Dispute Resolution Administrator does not, in the reasonable opinion of the PEM Board, continue to meet the requirements of clause 7.3.2.2, the PEM Board may terminate the appointment of the Dispute Resolution Administratorand select a replacement Dispute Resolution Administratorwho meets the requirements set out in clause 7.3.2.2. 

7.3.2.4 The Dispute Resolution Administrator,shall select at least seven persons to constitute the dispute resolution groupfrom which a dispute resolution panel can be selected in accordance with clause 7.3.5.1. 

7.3.2.5 For the avoidance of doubt, the dispute resolution groupselected under clause 7.3.2.4 may include any person the Dispute Resolution Administratorconsiders to be appropriately qualified in accordance with clause 7.3.2.7. 

7.3.2.6 Each person appointed to the dispute resolution groupunder clause 7.3.2.4: 

(a)           Is appointed for one year and is then eligible for reappointment;  

(b)           Is appointed on such other terms and conditions as the Dispute 

Resolution Administrator determines; and (c)    Shall be approved by the PEM Board. 

7.3.3 Dispute Management Systems 

All of the parties which are listed in clauses 7.3.1.1 (a) to (e) shall implement and adopt a dispute management system which is approved by the PEM Board. 

7.3.4 Dispute Resolution Process 

7.3.4.1 If a dispute arises to which the dispute resolution procedures under this clause 7.3 apply, the parties to the dispute shall act in good faith and use all reasonable endeavors to resolve the dispute through the procedures and alternative dispute mechanisms which are available to the parties through their dispute management system.  

7.3.4.2 If the parties to the dispute are unable to resolve the dispute in accordance with clause 7.3.4.1, any party who is involved in the dispute can refer the dispute to the Dispute Resolution Administrator in accordance with clause 7.3.4.3.  

7.3.4.3 If a party wishes to refer a dispute to the Dispute Resolution Administrator under clause 7.3.4.2, that party shall notify in writing the Dispute Resolution Administrator and all of the other parties to the dispute of which the party is aware: 

(a)           Of the existence of a dispute; and 

(b)           Setting out a brief history of the dispute including: 

(1)  The names of the parties to the dispute; 

(2)  The grounds of the dispute; and 

(3)  The results of any previous dispute resolution processes undertaken pursuant to theWESM Rules in respect of the dispute; and 

(4)  The listing of all unresolved issues and detail description thereof. 

7.3.4.4 If the Dispute Resolution Administrator receives a notice of a dispute under clause 7.3.4.3, the Dispute Resolution Administrator shall notify all other relevant parties of the dispute and shall request from those other parties their own short written history of the dispute or any relevant associated written comments and if the Dispute Resolution Administrator requests such information from a party to the dispute, that information shall be provided by that party within ten business days. 

7.3.4.5 If a matter has been referred to the Dispute Resolution Administrator under clause 7.3.4.2, then before taking any action to resolve the dispute, the Dispute Resolution Administrator shall determine whether it is reasonable that the dispute is one to which this clause 7.3 applies and shall advise the parties in writing of its decision. 

7.3.4.6 If the Dispute Resolution Administrator is not reasonably satisfied that the dispute is one to which clause 7.3.1.1 applies, the procedures set out in clause 7.3.4.7 do not apply to the dispute. 

7.3.4.7 If the Dispute Resolution Administrator is reasonably satisfied that the dispute is one to which clause 7.3.1.1 applies, the Dispute Resolution Administrator shall: 

(a)           Appoint a dispute resolution panelin accordance with clause 7.3.5; and 

(b)           Refer the dispute for resolution by the dispute resolution panel appointed under clause 7.3.5,  

within five business days of receiving any information from the parties to the dispute under clause 7.3.5.4. 

7.3.4.8 Subject to all time limits specified in clause 7.3.5, nothing in this clause 7.3 precludes the Dispute Resolution Administrator from facilitating resolution of the dispute by agreement between the parties to the satisfaction of the parties without appointing or involving a dispute resolution panel. 

7.3.5 The Dispute Resolution Panel 

7.3.5.1 Subject to clause 7.3.4.8, where the Dispute Resolution Administrator refers a dispute for resolution to a dispute resolution panel under clause 7.3.4.7, the DisputeResolutionAdministratorshall: 

(a)           Appoint a dispute resolution panel consisting of three people chosen by the Dispute Resolution Administrator as appropriate in the particular circumstances of the dispute from the dispute resolution           group  selected          by        the      Dispute    Resolution 

Administrator under clause 7.3.2.4; and 

(b)           Nominate one of the members of the dispute resolution panelto be the chairperson. 

7.3.5.2Replacement of a Dispute Resolution Panel Member 

7.3.5.2.1 Each party to a dispute may petition to the Dispute Resolution Administratorfor the removal of any one person appointed to the Dispute Resolution Panel stating the reasons why that person should be replaced.  The Dispute Resolution Administratormay replace the person in question for valid reasons. 

7.3.5.2.1 The replacement(s) shall come from the group established in clause 

7.3.2.4. 

7.3.5.3 A person who has previously served on a dispute resolution panel is not precluded from being appointed to another dispute resolution panel established in accordance with clause 7.3.5.1. 

7.3.5.4 When a matter is referred to a dispute resolution panel under clause 7.3.4.7 (b), the dispute resolution panel shall select the form of, and procedures to apply to, the dispute resolution process which: 

(a) The dispute resolution panelconsiders appropriate in the circumstances; and (b) Shall: 

(1)  Be simple, quick and inexpensive; 

(2)  Take account of the skills and knowledge required for the relevant dispute; 

(3)  Observe the rules of law; and 

(4)  Encourage resolution of disputes without formal legal representation or reliance on legal procedures. 

7.3.5.5 The dispute resolution process will take place at a venue determined by the dispute resolution panel in consultation with the parties and may include either party's premises or any other premises. 

7.3.5.6 The parties shall comply with any procedural requirements imposed by the dispute resolution panel in the resolution of the dispute including a requirement to exchange submissions, documents and information. 

7.3.5.7 The dispute resolution panel shall ensure that the dispute resolution process is completed and that the dispute resolution panel has given notice of its resolution of the dispute as soon as practicable but in any event within twenty business daysof the dispute being referred to the dispute resolution panel (or such longer period as the Dispute Resolution Administrator may permit following a request by the dispute resolution panel for an extension of time). 

7.3.5.8 Within ten business days of receiving notification from the dispute resolution panel of its resolution of the dispute, the parties shall provide written notice to the dispute resolution paneldescribing all action taken in accordance with the resolution of the dispute resolution panel. 

7.3.6 Disputes About Payment 

If a dispute arises between a WESM Memberand the Market Operator  in respect of final statementsor the supporting data provided with them in accordance with clause 3.14.5, then 

(a)  The dispute shall be referred to the Dispute Resolution Administrator in accordance with clause 7.3.4.3 within twelve months of the dispute arising; 

(b)  The Dispute Resolution Administrator shall notify all WESM Members who may be affected by the resolution of the dispute, including but not limited to WESM Members whose final statement may be amended as a consequence of the resolution of the dispute; and 

(c)   Those payments shall be settled without prejudice on the date specified for payment in the relevant final statement, notwithstanding a dispute regarding the amount. 

7.3.7 Disputes Affecting Final Statements 

Where an amount stated to be payable in a final statementis the subject of a dispute and the resolution of the dispute affects the amount payable, then: 

(a)          When the dispute is resolved in accordance with this clause 7.3, the Market Operator shall issue a revised final statementto replace each final statement affected by the resolution of the dispute, in accordance with clause 3.14.5; and 

(b)          The amount specified as payable by a WESM Member in a revised final statement (if any) shall be paid by the relevant WESM Member, whether or not that WESM Member is aparty to the dispute, on the date specified in the revised final statement.  

7.3.8 Legal Representation 

Legal representation before the dispute resolution panel may be permitted by the dispute resolution panelwhere the dispute resolution panel considers it appropriate or desirable. 

7.3.9 Cost of Dispute Resolution 

The reasonable costs of the parties to the dispute may be allocated by the dispute resolution panelfor payment by one or more parties as part of its resolution. 

7.3.10 Effect of Resolution 

7.3.10.1 A resolution of the dispute resolution panel is binding on the parties to the dispute, including, without limitation, any provision of the resolution relating to the settlement of payment by any of the parties and any provision as to the performance of actions by any of the parties. 

7.3.10.2 A requirement that a party to the disputesettle payment under:  

(a)           An agreement reached between the parties to a dispute under 

clause 7.3.4.1; or 

(b)           A resolution of the dispute resolution panel, is an obligation under the WESM Rules to settle payments. 

7.3.10.3 If a resolution of the dispute resolution panelapplies to a person referred to in clauses 7.3.1.1(a) to (e) that person shall comply with the resolution of the dispute resolution panel to the extent that the resolution applies to that person, notwithstanding that the person was not a party to the dispute. 

7.3.10.4 If a party to a dispute is not satisfied with the resolution of the dispute resolution panel, the party may file a formal complaint to the ERC.

7.3.11 Recording and Publication 

7.3.11.1 When the dispute resolution panel resolves a dispute, the chairperson of the dispute resolution panel shall send written details of the resolution of the dispute to the Dispute Resolution Administrator,the PEM Board,the ERCand the Market Operator as soon as practicable. 

7.3.11.2 Subject to clause 5.3, the details and results of each dispute which the dispute resolution panel resolves (including the reasons why the Dispute Resolution Administratordecided to appoint particular people to the dispute resolution panel) shall be published and made available to WESM Membersas soon as practicable after the resolution of the dispute by the dispute resolution panel.

7.3.11.3 Claims for confidentiality of information disclosed in the dispute resolution process shall be dealt with in accordance with the provisions relating to use of information in clause 5.3. 

7.3.12 Judicial Review 

Following ERCresolution of the dispute, any case which involves question of fact may be appealable to the Court of Appeals and those which involves question of law may be directly appealable to the Supreme Court. 

7.3.13 Limitation of Liability 

The Dispute Resolution Administrator, dispute resolution panel and its members are not to be liable for any loss or damage suffered or incurred by a Participant or any other person as a consequence of any act or omission of those persons unless the Dispute Resolution Administrator, the dispute resolution panel,or its members, as the case may be, acted with malice, manifest impartiality, bad faith, gross incompetence or gross negligence. 

7.3.14 Indemnity 

Notwithstanding clause 7.3.13, except for liability arising out of conduct involving malice, manifest impartiality, bad faith, gross incompetence or gross negligence, if the Dispute Resolution Administrator,the dispute resolution panel or the members thereof is made liable to pay any amount for loss or damage suffered or incurred by a person referred to in clauses 7.3.1.1(a) to (f) or any other person as a consequence of any of its acts or omissions in performance of dispute resolution, the PEM Board shall indemnify said persons through an indemnification process to be developed by the PEM Board.

(a)   For the full amount adjudged; and  

(b)   For costs and expenses incurred by that person in defending itself in the related proceedings. 

CHAPTER 8 

RULE CHANGE 

8.1       SCOPE OF CHAPTER 8 

Upon the actual commercial operation of the spot market, changes, amendments, and modifications of the WESM Rulesshall be undertaken in accordance with the provisions of this chapter. 

This chapter 8 sets out: 

(a)         The composition and manner of appointment of theRule Change Committee; 

(b)         The procedure for effecting a change to the WESM Rules; and (c)         The procedure for approval of a change to the WESM Rules. 

8.2       RULE CHANGE COMMITTEE 

8.2.1 Establishment of Rule Change Committee 

The PEM Boardshall establish a Rule Change Committee in consultation with industry participants. 

8.2.2 Composition of Rule Change Committee 

8.2.2.1 The Rule Change Committeeshall be comprised in a manner that is consistent with the composition of the PEM Board except that the persons representing each of the sectors and other groups on the Rule Change Committee shall not be the same persons as those who are Directorson the PEM Board.

8.2.2.2 The principles applicable to the composition and operation of the PEM Board as set out in clause 1.4.2 apply also to the composition and operation of the Rule Change Committee.

8.2.3 Membership requirements – PEM Board 

Each member of the Rule Change Committee shall: 

(a)   Be appointed by the PEM Boardin consultation with industry participants; and 

(b)   Not be a member of the PEM Board. 

8.2.4 Termination 

The PEM Boardmay terminate the appointment of any person appointed to the Rule Change Committee at any time if: 

(a)   The person becomes insolvent or under administration; 

(b)   The person becomes of unsound mind or a person whose person or estate  is liable to be dealt with in any way under a law relating to mental health; 

(c)   The person resigns or dies; or 

(d)   The person fails to discharge the obligations of their office. 

8.2.5 Appointment termination 

If the PEM Boarddecides to terminate a person’s appointment in accordance with clause 8.2.4, the PEM Boardshall appoint another representative from the same membership category to fill that person’s place on the Rule Change Committeewithin 20 business days. 

8.2.6 Resignation 

A person may resign from the Rule Change Committeeby giving notice in writing to the PEM Board.

8.2.7 Conduct of meetings 

TheRule Change Committeeshall meet and regulate its meetings and conduct its business in a manner which does not conflict with the WESM Rules. 

8.2.8 Advice and assistance 

The Rule Change Committeemay obtain such advice or other assistance as it thinks appropriate including, without limitation, advice or assistance from persons with experience relevant to any change to the WESM Ruleswhich the Rule Change Committeeis considering and from WESM Memberswho are likely to be affected by any change. 

            8.3      REFERRAL OF MATTERS TO THE RULE CHANGE COMMITTEE 

8.3.1 Rule change proposals 

The Market Operator, the Governmentor any WESM Memberand other interested parties may submit proposals for changes to the WESMRulesto the PEM Board. 

8.3.2 Form of submission 

Proposals for a change or changes to the WESM Rulesshall: 

(a)           Be in writing and addressed to the PEM Board; 

(b)           Include the name and address of the applicant; 

(c)           Demonstrate that the change to the WESM Rulesis: 

(1)   Consistent with the WESM objectives; 

(2)   Feasible;

(3)   Not unreasonably costly to implement; and 

(4)   A more appropriate or better means of achieving the criteria set out in clauses 8.3.2 (c) (1) to (c) (3), where the effect of the change to the WESM Ruleswill be to replace an existing provision of the WESM Rules;

(d)           Include a brief statement of the reasons why a change to the WESM Rulesis necessary or desirable; and 

(e)           Contain sufficient information to permit a proper consideration by the Rule Change Committee of those reasons, including the public benefit (if any) of making the change to the WESM Rules. 

8.3.3 PEM Board obligations 

The PEM Board shall:

(a)           Keep a register of all proposals for a change in the WESM Rulessubmitted 

to it; and 

(b)           Give due course to the proposal within 5 business daysfrom receipt thereof. 

8.4 CONSIDERATION OF PROPOSED RULES CHANGE BY THE RULES CHANGE COMMITTEE 

8.4.1 Assessment of proposed Rule change 

Within 10 business days from the referral from the PEM Board, the Rules Change Committeeshall assess whether the proposed change to the WESM Rulesis: 

(a)           Consistent with the WESM objectives; 

(b)           Feasible; 

(c)           Not unreasonably costly to implement; and 

(d)           A more appropriate or better means of achieving the criteria set out in clauses 8.4.1 (a) to (c), where the effect of the change to the WESM Ruleswill be to replace an existing rule. 

8.4.2 Discretions when assessment proposed Rule change 

In considering whether a proposed rule change satisfies the criteria, which are set out in clause 8.4.1, the Rules Change Committeemay: 

(a)   Take into account any information and documents which the Rules Change Committee reasonably considers to be relevant to its consideration of the proposed change to the WESM Rules;  

(b)   Consult with such persons as the Rules Change Committee reasonably considers will be likely to be affected by the proposed change to the WESM Rules; 

(c)   Seek such information and views from any person in relation to the proposed change to the WESM Rulesas may be practicable under the circumstances; and 

(d)   Refer the proposed change to the WESM Rulesto a working group comprising of persons having such expertise as the Rules Change Committee in its absolute discretion considers to be reasonable in all the circumstances for the purpose of delegating to that working group any obligation or task of the Rules Change Committee set out in clauses 8.4.2, 8.4.4 and 8.4.6, other than this clause 8.4.2 (d). 

8.4.3      Notification following failure to satisfy criteria 

If the Rules Change Committee concludes that a proposed change to the WESM 

Rulesdoes not satisfy the criteria set out in clause 8.4.1, the Rules Change Committeeshall notify the proponent and the PEM Board within 10 business days after receipt of proposal of its non-adoption of the proposal including the reason for its decision. 

8.4.4      Notification following satisfying criteria 

If the Rules Change Committeeconcludes that a proposed change to the WESM Rulessatisfies the criteria which are set out in clause 8.4.1, the Rules Change Committeeshall: 

(a)          Notify the PEM Board,all WESM Members and all other interested parties of the proposed change to the WESM Rules; and 

(b)          Invite such parties to make written submissions regarding the proposed change to the WESM Ruleswithin the next 30 businessdays after receipt of proposed rule change. 

8.4.5 Submissions regarding proposed Rule change 

To be validly considered, a written submission made in response to a proposed change to the WESM Rulesinvited under clause 8.4.4 (b) must be received by the Rules Change Committee no later than 30 businessdaysafter the notice referred to in clause 8.4.4 (a) is given. 

8.4.6 Consideration of submissions 

The Rules Change Committeeshall consider all valid submissions which it receives within 60 businessdays from the date the notification is given under clause 8.4.4(a).

8.4.7 Approval of proposed Rule change 

If the Rules Change Committee,after having considered all valid submissions, concludes that it is necessary or desirable to give effect to the proposed change to the WESM Rules, the proposed change to the WESM Rulesshall be submitted to the PEM Boardfor approval. 

8.5      CONSIDERATION OF PROPOSED RULES CHANGES BY THE PEM BOARD 

8.5.1 PEM Board assessment of proposed Rule change 

If the Rules Change Committee submits a proposed change to the WESM Rulesto the PEM Board for approval in accordance with clause 8.4.7, the PEM Boardshall, within 10 business days from receipt thereof, assess whether:  

(a)          The proposed change to the WESM Rulessatisfies the criteria which are set out in clause 8.4.1; and 

(b)          The processes and procedures set out in clause 8.4 have been duly followed. 

8.5.2 PEM Board discretions when assessing proposed Rule change 

In considering whether a proposed change to the WESM Rulessatisfies the criteria which are set out in clause 8.4.1, the PEM Boardmay: 

(a)           Take into account any information and documents which the PEM Boardreasonably considers to be relevant to its consideration of the proposed change to the WESM Rules;  

(b)           Consult with such persons as the PEM Boardreasonably considers will be likely to be affected by the proposed change to the WESM Rules; and 

(c)           Seek such information and views from any person in relation to the proposed change to the WESM Rulesas may be practicable in the circumstances. 

8.5.3 Notification following unsuccessful proposal 

8.5.3.1 If the PEM Board concludes that a proposed change to the WESM Rulesdoes not satisfy the criteria set out in clause 8.4.1, the PEM Boardshall notify: 

(a)       The Rules Change Committee; 

(b)       Any parties who made written submissions to the Rule Change 

Committee under clause 8.4.4; and (c)           The DOE and the ERC,  

within 10 business days of reaching that conclusion and shall provide reasons for its decision. 

8.5.3.2 If the PEM Board determines that the processes and procedures set out in clause 8.4 have not been duly followed, the PEM Board shall: 

(a)           Refer the proposed change to the WESM Rulesback to the 

Rules Change Committee so that the procedural error can be 

rectified within the earliest possible time in accordance with clause 8.4; and 

(b)           Take such steps as it considers reasonably necessary and appropriate in all the circumstances to ensure that the Rules Change Committee adheres to the processes and procedures set out in clause 8.4 in the future. 

8.5.4 Submitting proposed Rule change for approval 

If the PEM Board concludes that the proposed change to the WESM Rulessatisfies the criteria which are set out in clause 8.4.1 and that the processes and procedures set out in clause 8.4 have been duly followed, the PEM Board shall submit the proposed change to the WESM Rulesto the DOE for approval.

            8.6      APPROVAL OF PROPOSED RULES CHANGES 

8.6.1 DOE assessment of proposed Rule change 

If the PEM Board submits a proposed change to the WESM Rulesto the DOE, for approval in accordance with clause 8.4.4, the DOEshall assess whether the proposed change to the WESM Rulessatisfies the criteria which are set out in clause 8.4.1. 

8.6.2 DOE discretions when assessing proposed Rule change 

In considering whether a proposed change to the WESM Rulessatisfies the criteria which are set out in clause 8.4.1, the DOE, may: 

(a)   Take into account any information and documents which the DOE, reasonably considers to be relevant to its consideration of the proposed change to the WESM Rules;  

(b)   Consult with such persons as the DOE, reasonably considers will be likely to be affected by the proposed change to the WESM Rules; and 

(c)   Seek such information and views from any person in relation to the proposed change to the WESM Rulesas may be practicable in the circumstances. 

8.6.3 Notification following failure to satisfy criteria 

If the DOE concludes that a proposed change to the WESM Rulesdoes not satisfy the criteria which are set out in clause 8.4.1, the DOE,shall notify: 

(a)   ThePEM Board; 

(b)   The person who proposed the change to the WESM Rules; and 

(c)   Any party who made written submissions to the Rules Change Committee under clause 8.4.4, 

within 10 business daysof reaching that conclusion and shall provide reasons for its decision. 

8.6.4 Approval of proposed Rule change 

8.6.4.1 If the DOEconcludes that a proposed change to the WESM Rulesis consistent with the Act and the public interest and satisfies the criteria which are set out in clause 8.4.1, the proposed change to the WESM Ruleswill take effect when the change to the WESM Rulesis published, or on such later date as the DOE, determines. 

8.6.4.2 The PEM Boardshall develop a classification system of rule change proposals that will delineate proposals requiring DOEreview and approval vis-à-vis proposals that can be acted upon at the PEM Boardlevel.  This classification shall be approved by the DOE. 

8.6.5 Report by the Rules Change Committee 

TheRules Change Committee and the PEM Board shall develop and make available to WESM Members a periodic report, which sets out: 

(a)          All WESM Rule change proposals which have been made in the previous six month period; 

(b)          The progress of those WESM Rule change proposals in accordance with the procedures prescribed in this chapter 8; 

(c)           The reason for any delays in relation to the progress of those WESM Rule change proposals and any action the Rules Change Committee,the PEM Board or the DOE has taken to overcome those delays; and 

(d)          Any other matter which the Rules Change Committee,thePEM Board or the DOEreasonably considers to be relevant to the progress of WESM Rule change proposals, including but not limited to any policies developed by the Rules Change Committee,thePEM Boardor the DOE in relation to: 

(1)         The way in which it intends to deal with any procedure specified in this chapter 8; and 

(2)         The facts, matters or circumstances which the Rule Change Committee,the PEM Board or the DOE may take into account in making a decision and otherwise discharging its functions and obligations under this chapter 8, 

Provided that nothing in this clause 8.6.5 is to be taken to limit the exercise by the Rules Change Committee, the PEM Board or the DOE,as the case may be,of its discretion under this chapter 8. 

8.7       RULES CHANGE COMMITTEE INDEMNITY 

The Rules Change Committee and its members, and any working group to whom any task or obligation is delegated under clause 8.4, are not to be personally liable in any way for any change, which is made to the WESM Rules. 

CHAPTER 9 

INTERPRETATION 

            9.1      GENERAL 

In the WESM Rules, unless the context otherwise requires: 

(a)         Headings are for convenience only and do not affect the interpretation of the WESM Rules; 

(b)         Words importing the singular include the plural and vice versa; 

(c)         Words importing a gender include any gender; 

(d)         Where italicized, a word or phrase has the definition given to that word or phrase in chapter 10; 

(e)         Other parts of speech and grammatical forms of a word or phrase defined in the WESM Ruleshave a corresponding meaning; 

(f)           An expression importing a natural person includes any legal entity, company, partnership, joint venture, association, corporation or other body corporate and any government authority; 

(g)         A reference to any thing (including, but not limited to, any right) includes a part of that thing; 

(h)         A reference to a clause, paragraph, part, annexure, exhibit or schedule is a reference to a clause and paragraph and part of, and an annexure, exhibit and schedule to the WESM Rulesand a reference to the WESM Rulesincludes any annexure, exhibit and schedule; 

(i)           A reference to a statute, regulation, proclamation, order in council, ordinance or by-law includes all statutes, regulations, proclamations, orders in council, ordinances or by-laws amending, consolidating or replacing it, and a reference to a statute includes all regulations, proclamations, orders in council, ordinances, and by-laws issued under that statute; 

(j)           A reference to the WESM Rulesor to a document or a provision of a document includes an amendment or supplement to, or replacement or novation of, the WESM Rulesor that document or that provision of that document; 

(k)         A reference to a person includes that person’s executors, administrators, successors, substitutes (including, without limitation, persons taking by novation) and permitted assignees;  

(l)           A reference to a body other than a WESM Memberor theMarket Operator(including, without limitation, an institute, association or authority), whether statutory or not: 

(1)    Which ceases to exist; or