Philippine Wholesale Electricity Spot Market

______________________________________________
The Price Determination Methodology
for the Philippine Wholesale Electricity Spot Market
(Revision 23 January 2006)
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FOREWORD

The establishment of the Philippine Wholesale Electricity Spot Market (the “WESM”) is mandated
by Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of 2001”
(the “EPIRA”). The WESM is to provide the mechanism for determining the price of electricity not
covered by bilateral contracts between sellers and purchasers of electricity.

Pursuant to the mandate of the EPIRA, the Department of Energy (the “DOE”) jointly with the
electric power industry participants formulated the detailed rules for the WESM, i.e., the WESM
Rules. The WESM Rules were promulgated by the DOE on 28 June 2002. Among other things, the
WESM Rules provided for the mechanism for determining the prices of electricity in the market
not covered by bilateral contracts. This price determination methodology (the “PDM”) contained
in the WESM Rules is required by the EPIRA to be approved by the Energy Regulatory Commission
(the “Commission”).

The Price Determination Methodology for the WESM contained in this document was formulated
compliant with the WESM Rules and in consultation with the industry participants. Such
consultations were conducted through, initially, the WESM Technical Working Group (the “WESM-
TWG”), later the Interim Rules Change Committee, and the Philippine Electricity Market Board
(the “PEM Board”). This Price Determination Methodology gives the specific details as to how
dispatch schedules and locational marginal prices (i.e., nodal prices) are calculated in the Market
Dispatch Optimization Model (the “MDOM”) as provided for in WESM Rules clause 3.6.

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1. Objectives of the Price Determination Methodology

The Price Determination Methodology (the “PDM”) aims to –

1.1. Provide the market participants with the specific principles by which energy and
reserves in the WESM will be priced.

1.2. Provide the specific computational formula that will enable the market
participants to verify the correctness of the charges being imposed.

2. General Guiding Principles

The EPIRA and the WESM Rules are the main guiding documents for this PDM.

3. The Electricity Market Model of the WESM

The following characteristics and pricing principles are adopted:

3.1. The WESM adopts locational pricing to provide the correct economic signals to
market participants when they properly account for the economic impact of losses
and constraints that result from the operation of the electricity network.1

3.2. The WESM adopts the gross pool concept where each generator submits offers for
both price and quantity for energy for central scheduling and dispatch.2

3.3. The WESM adopts the principle of self-commitment whereby participants assume
full responsibility for how and when their plants are operated.3

3.4. The WESM adopts a full nodal pricing regime for both generation and customers.
Nodal pricing is a mechanism for revealing, at different points in the system, the
cost incurred to ensure sufficient power flows to meet all loads in all locations.4

3.5. The WESM adopts the scheme of ex-ante and ex-post pricing to account for
discrepancies between planned (ex-ante) and actual outcomes (ex-post).5

4. Dispatch and Pricing Algorithm

4.1. Description of the Market Dispatch Optimization Model

The Market Dispatch Optimization Model (the “MDOM”) performs market-clearing

computations. It receives information on system conditions and requirements from the

1
WESM Rules clause 3.6.1.3,3.6.1.4,3.6.1.5
2
WESM Rules clause 3.5.5
3
WESM Rules Section 3.5.5, 3.5.9, 3.5.10, 3.5.11)
4
WESM Rules clause 3.2.2.3 (A), as amended. See DOE Circular DC-2004-07-008 in Annex B
5
WESM Rules 3.10.1

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System Operator as well as market offers and bids from trading participants. It then
processes this information to come up with an optimum scheduling of energy and reserves
that will maximize economic gains for the trading participants taking into consideration
the physical limitations of the transmission network and of the facilities of the trading
participants. It utilizes linear programming techniques to create a security constrained
economic dispatch and calculate nodal energy prices for all market trading nodes in the
Market Network Model (the “MNM”) and reserve prices for all reserve regions. The nodal
energy prices are the locational marginal prices used to compute charges and payments
while the dispatch schedules is used to dispatch generators to maintain balance in the
power system.

4.2. Basic Algorithm of the MDOM

The MDOM aims to maximize the economic gain derived from electricity trades in the
market, considering the constraints imposed by existing system conditions.

The objective of the MDOM is to maximize:

Value of dispatched load based on demand bids,

Minus the cost of dispatched generation based on generation offers,
Minus the cost of dispatched reserves based on reserve offers,
Minus the cost of constraint violation based on constraint violation
coefficients.

The algorithm of the MDOM is given in the mathematical formulation below.6 The
detailed formulation is contained in Appendix III-2.

OBJECTIVE FUNCTION

Maximize the economic gain from trade, where:

Economic Gain = ∑ 

E EG ER NK

∑j ( DBi , j )( PDBi, j ) − ∑i ∑j ( Gi, j )( PGi, j ) − ∑i ∑ ∑ ( R )( PR ) − ( CVP ) 
D

i , j ,k i, j ,k
 i k j 

i ∈ resources (generators and dispatchable loads)

j ∈ energy and reserve offer blocks
k ∈ reserve types

Where:

6
WESM Rules clause 3.6.1.3

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PDBi,j The price per quantity element of the jth Energy Bid block of the ith
Dispatchable Load.
PGi,j The price per quantity element of the jth Energy Offer block of the ith
Generator (or dispatchable load).

PRi,j,k The price per quantity element of the jth Reserve Offer block of the kth
Reserve Type of the ith Resource.

Gi,j The MW quantity of the jth Energy Offer block of the ith Generator (or
dispatchable load).

Ri,j,k The MW quantity of the jth Reserve Offer block of the kth Reserve Type of
the ith Resource.

DBi,j The MW quantity of the “jth“ Energy Bid block of the ith Dispatchable
Load.

CVP The sum of penalty costs for soft constraints violations based on the
constraint violation coefficients, where:
CVP = ∑ [ CVC * Q ]
t
t t

CVCt = Constraint violation penalty cost for Constraint Violation Type “t”
Qt = Constraint violation quantity for Constraint Violation Type “t” 7

ED Total number of dispatchable loads with energy demand bids.

EG Total number of generators with energy offers.

ER Total number of resources (generators or dispatchable load) with reserve

offers.
NK Total number of reserve resources for each reserve type “k”

Subject to the following constraints:

Relevant Constraint Equation Constraint

WESM
Rules
clause

3.6.1.4.(a), Gmin, RRDN ,i ≤ Gi ≤ Gmax, RRUP ,i Generator Resource Energy

(d), (j) Constraint – the minimum and
maximum generation of a
generating unit (Gi) is
dependent on its ability to
ramp-down or ramp-up to its
minimum and maximum
generation.

7
Refer to section 4.9 for the types of constraint violation and Appendix III-1 for additional details on the formulation
of constraint violation coefficients.

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Relevant Constraint Equation Constraint

WESM
Rules
clause

Ri ,k ≤ R max,i ,k Reserve Resource Constraint -

the reserve schedule for
resource “i” of reserve category
“k”8 should be less than or equal
to maximum reserve for
category “k” of resource “i”

Where:
k=1, Regulation reserve
k=2, Contingency reserve
k=3, Dispatchable reserve
k=4, Interruptible load reserve

3.6.1.4 (b) ( Ri ,k =1 + Ri ,k = 2 + Ri ,k =3 ) + Gi ≤ G max,i Reserve and Energy Constraint –

the sum of reserve schedule for
each reserve category “k” plus
the energy schedule (Gi), for
each resource generator “i”,
must be less than or equal to
the maximum stable generation
(Gmax) of generator resource “i”.

Ri ,k =4 ≤ DBi Interruptible load reserve schedule

for customer “i” should be less
than or equal to energy schedule
for dispatchable load (DB) for
customer “i”.

3.6.1.4 (c), [ Pn ] = [ B][θ ] Nodal Energy Balance Constraint –

(i) The total power (P) at node “n”
must be equal to the injected
power by the generator at node “n”
less the total MW power withdrawn
by customers at node “n.” This is
represented in the constraint
equations as the product of
transmission network admittance
“B” and nodal angle “θ”.

8
Please see Section 9. Reserve Categories for the different categories of reserves in WESM.

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Relevant Constraint Equation Constraint

WESM
Rules
clause

3.6.1.4 (e)
∑∑ R
i j
i , j ,k + QRk ,a = R req k ,a Area “a” Reserve Requirement
Constraint for each reserve type
“k” - the Reserve requirement
(Rreq) for each area shall be
satisfied by local generators or
dispatchable loads on each
specified area “a.”

Where:
QRk ,a refers to the MW amount
by which each reserve type “k”
was violated in area “a.”
Ri , j ,k refers to the MW quantity
of the jth reserve offer block of
the ith resource.

3.6.1.4 (f) Pflowm,n ≤ PL,l Line flow constraint for any line
“l” where:
Pflowm,n = MW power flow from
node “m” to “n”.
PL ,l = MW limit of line “l”
connecting node “m” to “n”.

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Relevant Constraint Equation Constraint

WESM
Rules
clause

3.6.1.4 (g)
∑∑G i, j + QUG = ∑ DB + ∑ P
i Loss , a + QOG System Energy Balance
i j i a Constraint - the sum of the MW
quantity of the “jth“ Energy
Offer block of the “ith“
Generator plus the sum of the
total system under generation
(QUG) is equal to the total MW
quantity of the load (DB) for all
customer “i” plus the sum of all
network losses (PLoss) plus the
sum of the total system over-
generation (QOG).

If no under-generation or over-
generation is present, QUG and
QOG are zero.

3.6.1.4 (h) ∑∑G i , j ,a

−∑ DBi ,a − PLoss,a + QTCGa ,import ≥ ImportLimita Regional Energy Import
i j i
Constraints - The sum of the
MW quantity of the “jth“ Energy
Offer block of the “ith“
Generator in area “a” less the
sum of the total MW quantity of
the load (DB) for all customer
“i” in area “a” less the MW
value of loss in area “a” plus the
MW value of the import limit
(QTCGa,import) that was violated
should be greater than or equal
to the import MW limit of area
“a.”

If there is no import limit

violation then QTCGa,import is zero.

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Relevant Constraint Equation Constraint

WESM
Rules
clause

3.6.1.4 (h) ∑∑G i , j ,a − ∑ DBi,a − PLoss,a + QTCGa ,exp ort ≥ ExportLimita Regional Energy Export
i j i
Constraints - the sum of the MW
quantity of the jth Energy Offer
block of the ith Generator in
area “a” less the sum of the
total MW quantity of the load
(DB) for all customer “i” in area
“a” less the MW value of loss in
area “a” plus the MW value of
the export limit (QTCGa,export)
that was violated should be
greater than or equal to the
import MW limit of area “a.”

If there is no export limit

violation then (QTCGa,export) is
zero.

3.6.1.4 (k) Gi − Ri ,k =1 ≥ Gmin,i Regulation headroom constraint

- The head-room constraint is
imposed on REG reserve
resources in order to schedule
the energy output of the
generator resource “i” with
consideration of its minimum
stable generation limit.

4.3. Required Inputs to the MDOM

The MDOM receives input data from three sources, namely, the System Operator,
the trading participants and the Market Operator. The information provided is as
required in the WESM Rules.

System Operator

Network data;
System snapshot;
Reserve requirements for each type of reserve in a reserve region;

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Outage schedules;
Contingency List;
Transmission limits;
Security limits; and
Load pattern.

Trading Participants

Registration Data;
Generation Offers;
Reserve Offers;
Demand Bids; and
Optional Load Forecast.

Market Operator

Market Network Model;

Load Forecast; and
Constraint Violation Coefficient.

Appendix A.1 of the WESM Rules details the information to be supplied with
offers to supply and to buy electricity while Appendix A.2 provide details on
the information to be supplied by network service provider.

4.4. The Output of the MDOM

The optimization process will produce the following outputs:

System Marginal Price;

Generation output levels for each generating resource;
Scheduled load for each dispatchable load;
Reserve schedule for each generating resource;
Transmission line flows;
Transmission losses;
Energy prices at each market trading node; and
Regional reserve prices.

4.5. Determination of the Dispatch Schedule

All generators will submit offers to the market for all the energy they intend to produce
irrespective of their contracts with their customers. The Market Operator will then
schedule all the available generation to meet the forecasted load, taking into account the
capabilities of the transmission network to transport the energy from generators to
costumers and the limitations of the individual generating resources. Customers with
dispatchable loads have the option to post their demand bids in the market. This dispatch
model where all energy is traded through the WESM is known as the gross pool.

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Pursuant to the central scheduling process set in the WESM Rules, the trading participants
will submit their respective market offers or bids to the market through the market
interface that will be provided by the Market Operator. The generators must submit a
price and quantity offer to the Market Operator, while the customers may submit price
and quantity bids.

The Market Operator considers the submitted bids and offers and the corresponding
limitations and constraints in preparing the final dispatch schedule. The resulting
dispatch schedule is the schedule followed by generating facilities and takes account of
all constraint parameters present in the system for the relevant time interval in order to
maintain power balance in the grid.

Through the MDOM, the offers submitted by the generators are ranked from the lowest to
the highest price offer, while the bids submitted by the customers are ranked from the
highest to the lowest price offer. Generating facilities that are scheduled to run are
stacked based on their price offers until the total generation matches the total load
requirement for a particular trading interval.

The inputs to the MDOM submitted by the trading participants are likewise considered in
the preparation of the dispatch schedule.

Figure 1 below provides an overview of the market dispatch scheduling and pricing.

T rad in g P artic ip an t (T P ) M arket O p erato r (M O ) S ystem O p erato r (S O )

• M ark et N etw ork M ode l
• Load F orecast

S ystem C o n d itio n
M arket In p u t D ata • S ystem S na pshot
• E nerg y bids and offers • O utages/co ntinge ncies
• R eserve offers • T ransm ission lim its
• R eserve R eq uirem ents
M arket
D isp atch
O p tim izatio n
M o d el

M arket C learin g R esu lts (M D O M )

• Locationa l M argina l D isp atch In stru ctio n s
P rices an d S ch edu les • D ispatch targets

F ig u re 1 . M arke t P ric in g a n d S c hed u lin g O vervie w

4.6. Determination of Nodal Prices

The price at a particular node in the system (i.e. nodal price), signals the economic value
of the electricity given the supply and demand interaction at that node. It represents the
benefit of supplying electricity or the cost of consuming electricity at that location under

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the specific system conditions that were considered in the dispatch scheduling process.

Nodal prices will differ across nodes in the network due to the presence of physical losses
or network constraints (i.e., congestion).

In an unconstrained system, the market price is set by one marginal plant (i.e., the
system marginal price). This price is adjusted for each node to consider transmission
losses, and the resulting value is the locational marginal price (the “LMP”).

Where the system is constrained, the relevant flows of electricity are affected as the line
limitations arising from the constraint may impede the supply of cheaper electricity from
one area to another. In such cases, there may be more than one marginal plant setting
the marginal price for the different nodes on either side of the constraint.

4.7. Price Adjustment to Reflect Transmission Losses and Congestion

The nodal prices are to be adjusted to reflect changes in power flows and losses as well as
any congestion in the system, and signal to the market the relevant cost to produce and
purchase electricity at the relevant market trading nodes. Specifically, the various nodal
prices are to be adjusted by considering transmission loss factors and cost of congestion in
each location in the system, thus, resulting in the locational marginal prices.

Locational marginal prices are the economic value of energy at each node considering the
marginal price of generation, transmission losses and congestion, as given by the following
formula:

Marginal Marginal Marginal

LMPi = Generator + Transmission + Congestion
Price Loss Price Price

In mathematical form:

 1  
LMPi = λ +   − 1  ∗ λ  + ∑µ j a ij
  TLF i  
Where:

LMPi = Locational Marginal Price at location “i”

λ = The system marginal price based on marginal plant offer
TLFi = Transmission Loss Factor at location “i”
uj = Price corresponding to jth transmission constraint9

9
µ j is the price associated with the change of the schedules of the generators within the optimization process to
prevent overloading a constrained transmission line or lines.

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aij = Sensitivity factor relating the contribution of generation at location

“i” to the energy flow related to constraint “j”10

The three terms defined in the mathematical equation are -

ƒ The first term is the system marginal price which is the price set by the
marginal generator scheduled in any trading interval or period.

ƒ The second term is the change in the system marginal price due to losses
and location.

ƒ The third term is the change in the system marginal price due to
transmission constraints.

For an unconstrained optimization, the uj has a zero value, thus:

 1  
LMPi = λ +   − 1 ∗ λ 
  TLF  

Simplifying further:

 λ 
LMPi =  
 TLF i 

4.8. Transmission Loss Factors

Transmission loss factors (the “TLF”) are scaling factors applied on the nodal prices to
account for the network loss associated with the delivery or with the consumption of
energy at different locations in the system. Transmission loss factors are dynamically
computed within the MDOM to fully account for the dynamic change in the losses due to a
change in load at the various nodes.

The transmission loss factor at location “i” is defined as follows:

 ∂P 
TLFi = 1 − loss 
 ∂Pi 
Where:

10
The sensitivity factor aij represents the amount of power (MW) flow change in a constrained line or lines due to the
change of the schedules of the generators to prevent overloading the constrained line or lines.

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TLFi = Transmission loss factor applied at location “i”

∂Ploss
= The incremental change in loss due to the incremental
∂Pi
change of power at location “i”.

4.9. Constraint Violation Coefficients

The constraint violation coefficients (the “CVCs”) listed in WESM Rules clauses 3.6.1.3
(c) and 3.6.2 correspond to soft constraints in the MDOM and are associated with
constraint violation prices. The CVCs are incorporated in the MDOM to ensure that, if
constraints shall be violated, the violation will occur in an appropriate priority order that
takes account of the security and reliability of the power system and the implementability
of the resulting dispatch schedule.

The following are the types of CVCs incorporated in the MDOM:

ƒ Deficit Interruptible Load Reserve

ƒ Deficit Dispatchable Reserve
ƒ Deficit Regulating Reserve
ƒ Deficit Contingency Reserve
ƒ Nodal Value of Lost Load
ƒ Contingency
ƒ Under-generation/Over-generation
ƒ Base Case Constraint
ƒ Transmission Constraint Group (TCG) constraint

If any of these CVCs are encountered by the MDOM, the associated CVC prices will be
reflected in the nodal prices to signal the risks to the power system of violating the
constraint/s.

If CVCs are indicated in the ex-ante nodal prices or when the resulting prices are believed
to be in error, the Market Operator may issue a pricing error notice in which case the ex-
post prices calculated at the end of that the relevant trading interval shall be substituted
to the ex-ante prices. This is pursuant to clause 3.10.5 of the WESM Rules.11

4.10. Tie breaking/Handling of Equivalent Offers

In cases where two or more schedules are optimal, the MDOM will pro-rate the dispatch to
the affected trading participants while observing equipment limitations. The pro-rating
rules will be based on the size of the MW block of the price curves containing the non-
unique schedules.12

Appendix III-2 presents two examples of the application of the pro-rating rules.

11
See in Annex H, Constraint Violation Coefficients
12
See Appendix III-2 for the sample application of the tie-breaking rules.

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13
5. Relevant Market Timetable

5.1. Submission of Bids and Offers

5.1.1. Standing Bids/Offers

A standing offer/bid remains valid until it is revised by a new standing offer/bid.

Offers/Bids for specific trading days and trading intervals may be overridden by an
offer/bid revision. Once the period covered by the offer/bid revision has expired,
however, the standing offer/bid is again in effect.

A revision of a standing offer/bid may be done at anytime in accordance with the

market timetable14. The changes will, however, take effect from the end of the
trading interval covered by the last published or initiated week-ahead projection
(i.e. from current day, D, plus seven days) and before the week-ahead projection
is initiated, or at D plus eight days after the revision is submitted. Any revisions
within the time in which the revision of standing offer/bid has not yet taken effect
must be done as revision offer/bid, discussed below, and not as revised standing
offers/bids.

5.1.2. Revision Bids/Offers

For the week-ahead market projection covering D+1 to D+7, all offer/bid revisions
for scheduled generation or load facilities are to be submitted and confirmed by
the trading participants before 0900h of the current day, D.

For the day-ahead market projections, all offer/bid revisions for scheduled
generation or load facilities are to be submitted and confirmed by the trading
participants before 0000h, 0400h, 0800h, 1200h, 1600h, 2000h of the current day,
D.

For the current trading day, all offer revisions for scheduled generation or load
facilities are to be submitted and confirmed before gate closure, which is four
hours before the start of the trading interval for which the offers/bids being
revised are made.

5.2. Week Ahead Dispatch Process

The Week-Ahead Market Projection (the “WAP”) requires all relevant data to have been
submitted by 0900h. The WAP is run everyday at 0900 hours to determine the market
projections for the next seven days. After the run is completed, the resulting prices and
schedules are published to the trading participants. The Market Operator may also run
additional week-ahead projections in the event that there are material changes. The

13
See Annex E, Dispatch Protocol, and Annex K, Billings and Settlement Manual for the specific details on the
timetable of the dispatch processes and settlement, respectively.
14
For the details of the market timetable, see the Dispatch Protocol in Annex E.

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results of the additional projections are likewise communicated to the trading

participants.

5.3. Day-Ahead Dispatch Process

The Day-Ahead Market Projection (the “DAP”) is run and published every four hours. The
DAP run before 1200h on a given day covers the trading intervals up to the end of that
day. The DAP run on or after 1200h covers the trading intervals until the end of the next
trading day (i.e., at 1200h, the DAP calculates prices and schedules for the next 36
intervals).

The Market Operator may also run additional day-ahead projections in the event there
are material changes and this is communicated to the trading participants.

5.4. Real-Time Dispatch (Ex-Ante Dispatch)

The ex-ante real-time dispatch is run five minutes prior to the start of a trading interval
using the latest snapshot of the power system and cleared offers and bids to the market.
After each run, the resulting prices and schedules are then published. The resulting
dispatch schedule is also sent to the System Operator to be used as the basis for physical
dispatch target for the end of the trading interval.

5.5. Real-Time Dispatch (Ex-Post Dispatch)

At the end of each trading interval, the ex-post real-time dispatch is run using the latest
snapshot of the power system and the bids/offers used in the calculation of ex-ante
prices. For settlement purposes, the calculated ex-post prices and revenue meter
quantities are used.

6. Market Network Model

The Market Operator is to maintain and publish a Market Network Model, which will be used for
the determination of the dispatch schedules and nodal prices, pursuant to WESM Rules clause
3.2.1. The Market Network Model is developed by the Market Operator in consultation with
electric power industry participants and is approved by the Philippine Electricity Market Board
(“PEM Board”).

The Market Network Model is a sound representation of the power system elements. It provides
information on the technical characteristics and limitations of the power system that may
materially affect the dispatch of generating units and the electricity prices in the market.

The Market Network Model is automatically adjusted to accurately reflect power system
conditions thru the system snapshot provided by SO.15

7. Market Trading Nodes

15
See Annex G, Market Network Model Manual for details of the procedures for updating the Market Network Model.

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The market trading nodes, as defined in the WESM Rules clause 3.2.2, are classified as either (1)
generator nodes or (b) customer Nodes

8. Pricing Zones

8.1. Reserve Pricing Zones

The Market Operator shall group the market trading nodes into reserve pricing zones.
Initially, the reserve pricing zones shall consist of three (3) separate zones, namely, Luzon
grid, Visayas grid, and Mindanao grid. Whenever appropriate, this definition of reserve
pricing zones may be modified or amended subject to further validation.

8.2. Customer Pricing Zones

Originally, WESM Rules clause 3.2.3 provided that customer market trading nodes may be
grouped into customer pricing zones and all customers within a customer pricing zone
shall pay the same price for electricity consumed within the zone at the same time
interval.

The WESM Rules were, however, amended such that nodal pricing shall be adopted for
customers and customer zonal pricing shall become optional and not mandatory.16

9. Reserve Categories

Four reserve categories have been defined for co-optimization in the MDOM, consistent with
WESM Rules clause 3.6.1.1. The reserve categories are as follows -

ƒ Regulation Reserve (REG) - the ability to respond to small fluctuations in system

frequency including but not limited to those caused by load or generation changes.
This is also termed as “Load Following and Frequency Regulation.”

ƒ Contingency Reserve (CON) - 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. This is also termed as “Spinning Reserve.”

ƒ Dispatchable Reserve (DIS) - the ability to respond to a re-dispatch performed by

the System Operator during a trading interval, on either a regular or an ad hoc
basis. This is also termed as “Back-up Reserve.”

ƒ Interruptible Load (ILD) - the ability of a Customer to disconnect loads from the
Grid within a very short notice in response to a frequency deviation or a request of
the System Operator.

16
See Annex B, DOE Circular DO-2004-07-008 for the amendments to WESM Rules clauses 3.2.2.3(A), 3.2.3.1 and
3.2.3.2.

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Prior to the commencement of the spot market for ancillary services,17 procurement of reserves
can be facilitated by the System Operator outside the market through competitive bidding or
negotiated contracts.18 The procedures and related cost recovery mechanisms for reserve trading
in WESM will be submitted to the Commission for approval in a separate and independent filing.

10. Bilateral Contracts

10.1. Treatment of Bilateral Contracts

WESM Rules clause 3.5.5.1 requires all generators to submit offers to the market for all of
the energy they intend to deliver irrespective of their commercial contracts with
consumers and retailers.

Trading participants with bilateral contracts that prefer their bilateral contracts to be
accounted for in the market settlements will notify the Market Operator of their bilateral
contract quantities and their counterparties.19

10.2. Line Rental Amounts for Bilateral Contracts

WESM Rules clause 3.13.7 provides for the adjustment of the energy settlement quantity
to net out bilateral contract quantities in the market settlement trading amount of a
particular trading participant. In such cases, specific line rental amounts shall be charged
corresponding to the bilateral contract quantities that were netted out. This is in order to
fully account for the line usage of these bilateral energy flows in the market, and to allow
the market settlement accounts to balance. In so doing, the bilateral contract holders will
likewise pay for the line rental amounts as required of all market participants. Thus, a
trading participant that notifies the Market Operator of its bilateral contract quantity
must likewise identify the counterparty to its bilateral contract as well as the party that
will pay the line rental trading amount associated with the bilateral contract quantity
submitted.20

For bilateral contracts that are netted out of or settled outside the market, the line
rental amount that will be charged to the bilateral contract quantity is the price
differential between the sending and receiving nodes. WESM Rules clause 3.13.12 provides
for the formula for the calculation of the line rental amounts for each transmission line in
the Market Network Model, and is represented as follows:.

Line rental = PRQR - PSQS

Where:
QR = expected flow of energy out of the receiving node of the
market network line as determined by the MDOM.
PR = ex-ante nodal settlement price at the receiving node.

17
See WESM Rules clause 10.3.23
18
See WESM Rules clause 10.3.2.1
19
See WESM Rules clauses 3.13.1 and 3.13.7
20
See WESM Rules clause 3.13.1.1 (b), as amended in Annex B, DOE Circular DC-2004-07-008.

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QS = expected flow of energy into the sending node.

PS = ex-ante nodal settlement price at the sending node of the
market network line as determined by the MDOM.

For bilateral contracts that are netted out of or settled outside the market, the
bilateral contract quantity, BCQ, would be equal to both QR and QS, such that:

Line rental amount = PR*BCQ - PS*BCQ

= (PR - PS)*BCQ

11. Treatment of New and Renewable Energy

with Intermittent Energy Resource

Providers of new and renewable energy with intermittent energy resource (the “NRE-IER”) are
required to submit their respective forecast generation as ahead of schedule as practicable and
consistent with the WESM timetable (i.e. week ahead, day ahead and hour ahead).21 These
forecasted levels are to be netted out from the supply requirements corresponding to the load
requirements for the relevant time intervals. The NRE-IER is treated as a non-scheduled
generation by the WESM and, as such, is treated as a price taker.

The market shall provide adequate levels of reserve (i.e. within the relevant zones), taking into
account the probability of the NRE-IER provider not being able to fulfill its schedule.

12. Treatment of Must Run Generation

Under the Dispatch Criteria for Must Run Units22 , the System Operator can nominate certain
generating plants to run, not in accordance with the merit order, but in order to maintain system
reliability or to support system security. In nominating these must-run plants, the System
Operator will consider the following criteria (a) system voltage requirement; (b) thermal limits of
transmission lines and power equipment; and (c) system tests of Transco facilities/equipment

Even as the importance of nominating must-run plants is recognized, it is likewise recognized

that these plants should not be allowed to set the prices in the WESM but should rather be
considered as price-takers. This is to obviate their gaining unnecessary commercial advantage or
market power.

13. Billings and Settlements

The Market Operator shall determine the settlement amount for each trading participant based
on the settlement formula described in WESM Rules clause 3.13.14.

The settlement process involves the determination of ex-ante energy trading amount and ex-post
energy trading amount, adjusted for bilateral contract quantities in accordance with WESM Rules
21
See WESM Rules clause 3.5.5.5,
22
See Annex D, Dispatch Criteria for Must Run Units

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clause 3.13.7. The methods of calculations are described below. Particular details on the
timeline and implementation of the settlement provisions of the WESM Rules are detailed in the
Billings and Settlement Manual.23

13.1. Determination of Ex-Ante Trading Amount

The ex-ante energy trading amount for each trading node and trading interval is
determined as the ex-ante energy settlement price for that node in that trading interval
multiplied by the ex-ante energy settlement quantity for that node in that trading
interval.24 The ex-ante nodal energy prices and quantities are outputs of the MDOM
representing the expected prices and quantities at the market trading nodes and are
scheduled by the Market Operator prior to actual dispatch by the System Operator. Their
values depends on generation offers, reserve offers, and demand bids submitted by the
trading participants at the times set in the market timetable25, and the net load forecast
prepared by the Market Operator.26

The working formulations for determining trading amounts of generators and customers
are as follows:

For Generators: EAETAk,hm= (EAESPhm x (EAQSIk,hm -BCQk,b, hm))

Where:

EAETAk,hm represents the ex-ante energy trading amount for

Generator “k” at trading interval “h” and metering point “m”;

EAESPhm is the ex-ante energy settlement price for the trading interval
“h” and metering point “m”, which is the market clearing price for the
trading node where the generator is connected;

EAQSIk,hm is the ex-ante quantity of energy that is scheduled for injection

by the generator “k” for trading interval “h” and metering point “m”; and

EAQSIk,hm=0.5 x (XAGQk,hm+XAIGQk,hm)27

XAGQk,hm is the ex-ante target quantity for generator “k” at trading

interval “h” and metering point “m”;

XAIGQk,hm is the ex-ante initial quantity for generator “k” at trading

interval “h” and metering point “m”;

and

23
See Annex K, Billings and Settlements Manual
24
See WESM Rules clause 3.13.8.
25
See Annex E, Dispatch Protocol, for the timeline on the submission of offers/bids into the WESM.
26
See WESM Rules clause 3.5.4
27
See WESM Rules clause 3.13.5.1

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BCQk,b,hm is the bilateral contract quantity associated with generator “k”,

and the corresponding buyer or customer “b” for trading interval “h” and
metering point “m”.

For Buyers: EAETAb,hm=(EAESPhm x (EAQSWb,hm-BCQk,b,hm))

Where:

EAETAb,hm is the ex-ante energy trading amount for buyer/customer “b”

for trading interval “h” and metering point “m”;

EAESPhm is the ex-ante energy settlement price in trading interval “h”

and metering point “m” which is the market clearing price for the trading
node where the buyer/customer is connected;

EAQSWb,hm is the ex-ante quantity of energy that is withdrawn from the

system by the buyer/customer “b” for trading interval “h” and metering
point “m”;

EAQSWb,hm=0.5 x (XALQb,hm+XAILQb,hm)

XALQb,hm is the ex-ante target quantity for buyer/customer “b” for

trading interval “h” and metering point “m”;

XAILQb,hm is the ex-ante initial quantity for buyer/customer “b” for

trading interval “h” and metering point “m”;

and

BCQk,b,hm is the bilateral contract quantity associated with buyer/customer “b”,

and the corresponding generator “k” for trading interval “h” and metering point
“m”..

13.2. Determination of Ex-Post Energy Trading Amount

The ex-post energy trading amount for each market trading node and trading interval is
the product of the ex-post energy settlement price multiplied by the difference between
the ex-post energy settlement quantity and the ex-ante energy settlement quantity.28

The ex-post nodal energy prices and quantities are outputs of the MDOM and represent
the actual energy prices and quantities at particular market trading nodes. Their values

28
See WESM Rules clause 3.13.9

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depends on generation offers, reserve offers, demand bids, bilateral contracts and actual
node loads as registered in the revenue meters.

The ex-post prices and trading amounts for generators and customers or buyers are
determined as follows -

For Generators: EPETAk,hm= (EPESPhm x (AQEIk,hm– EAQSIk,hm))

Where:

EPETAk,hm is the ex-post energy trading amount for generator “k” at

trading interval “h” and metering point “m”;

EPESPhm is the ex-post energy settlement price in trading interval “h” and
metering point “m” which is the market clearing price in the ex-post
market for the trading node where the generator is connected;

AQEIk,hm is the actual quantity of energy injected by generator “k” at

trading interval “h” and metering point “m”;

EAQSIk,hm is the ex-ante energy quantity scheduled in the market for

injection by generator “k”, at trading interval “h” and metering point “m”.

For Buyers: EPETAb,hm= (EPESPhm* x (AQEIb,hm– EAQSWb,hm))

Where:

EPETAb,hm is the ex-post energy trading amount for customer/buyer “b” at

trading interval “h” and metering point “m”;

EPESPhm is the ex-post energy settlement price in trading interval “h” and
metering point “m” which is necessarily the market clearing price in the
ex-post market;

AQEIb,hm is the actual quantity of energy withdrawn by customer/buyer “b”

at trading interval “h” and metering point “m”;

EAQSWb,hm is the ex-ante energy quantity scheduled in the market for

withdrawal by customer/buyer “b”, at trading interval “h” and metering
point “m”.

Net load forecasts are utilized in the ex-ante calculation while actual load values
provided by the Energy Management System snapshot of the power system are
utilized for ex-post calculations. Except for this difference in the inputs, the MDOM

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process involved in the determination of ex-post energy settlement quantity and

price is similar to that utilized for determining the ex-ante settlement quantity
and price.

13.3. Allocation of Net Settlement Surplus

The surplus or deficit resulting from the aggregate settlement transactions is

termed in the WESM Rules as the net settlement surplus.29 Net settlement surplus
arises when the total payments of customers exceeds the total payments to
generators. This generally happens when there is congestion in the power system.
In some circumstances (e.g. loop flows, forecasting error, etc.), the payments to
generators exceed payments from customers which then results to a deficit in the
net settlement.

The net settlement surplus may be30:

ƒ retained by the Market Operator to fund deficit settlement as a

result of transactions required in clause 3.13.14 of the WESM Rules;

ƒ flowed back to the trading participants in accordance with the

procedures to be developed under clause 3.13.16.3 of the WESM
Rules, and;

ƒ may be used by the Market Operator to establish and support the

market for Financial Transmission Rights subject to the approval of
the PEM Board.

The settlement surplus will also be accounted for and taken into account when
setting allowable charges under any regulatory instruments applying to the Market
Operator.31

The Market Operator will develop procedures on the possible uses of net
settlement surplus subject to approval by the PEM Board; and, continuously
review the procedures on possible uses of such surplus to the extent the Market
Operator considers it to be reasonably necessary to promote WESM objectives. Any
changes made on the procedures are approved the PEM Board.32

In regard to this, the Market Operator shall publish summary reports on the
amount of any net settlement surplus being generated and every year thereafter,
publish a review of the underlying factors giving rise to the surplus, and attempt
to identify any binding constraints which may have caused or contributed to such
29
WESM Rules clause 3.13.16.1
30
See WESM Rules clause 3.13.16.2 and 3.13.16.3, as amended by DOE Circular DO-2004-07-008, in Annex B.
31
See WESM Rules clause 3.13.16.2, as amended by DOE Circular DO-2004-07-008, in Annex B.
32
See WESM Rules clause 3.13.16.2, as amended by DOE Circular DO-2004-07-008, in Annex B.

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surplus.33 The Market Operator will also determine, in consultation with trading
participants and 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.34

14. Administered Price Cap

The WESM Rules authorizes the Market Operator to impose an administered price cap during
market suspension or intervention. The administered price cap is to be used as basis for
settlements.35

The term administered price cap implies that a price ceiling will be imposed. More
appropriately, however, what should be imposed is the price itself that will be used for
settlement purposes, rather than merely a ceiling.

The methodology for determining the administered prices are being developed and will be
presented for approval by the Commission in a separate, independent filing.

33
See WESM Rules clause 3.13.16.3, as amended by DOE Circular DO-2004-07-008, in Annex B.
34
See WESM Rules clause 3.13.16.3, as amended by DOE Circular DO-2004-07-008, in Annex B.
35
See WESM Rules clause 6.2.3

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Appendix III-1
Detailed Formulation of the Market Dispatch Optimization Model

The Market Dispatch Optimization Model (the “MDOM”) determines the schedules and
prices for both energy and reserves. The objective of the MDOM is to maximize:

• Value of dispatched load based on demand bids,

• Minus the cost of dispatched generation based on generation offers,
• Minus the cost of dispatched reserves based on reserve offers,
• Minus the cost of constraint violation based on constraint violation
coefficients.

The MDOM simultaneously solves the economic gain maximization problem for both
energy and reserves in a trading interval and correspondingly produces energy and
reserve schedules, nodal energy prices and area reserve prices for different reserve
types.

The maximization problem is subject to different constraints, which include:

• System energy balance,

• Regional energy import/export constraints,
• Area reserve requirements constraints,
• Resource Energy Constraint,
• Reserve Resource Constraint,
• Reserve-Energy Constraint,
• Transmission Constraint

REQUIRED INPUTS TO THE MDOM

The MDOM receives input data from three sources, namely, the System Operator, the
trading participants and the Market Operator.

1 System Operator

The System Operator sends its input data in the form of a flat-file to the Market
Management System (MMS). These flat-files form part of the pre-processing
process and become input parameters to the MDOM. The flat-files from the System
Operator are described below.

1.1 System Snapshot

The system snapshot contains the latest power system condition provided by the
System Operator’s Energy Management System (the “EMS”) at five-minute

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intervals to the MMS. The snapshot provides the level of power injected or
withdrawn from the system at different market trading nodes which are monitored
by remote telemetering units (RTU). It also provides the latest topology (i.e.
configuration) of the power system as represented in the EMS topology and
represented in the Market Network Model used by the MDOM.

1.2 Reserve Requirements

Regulation (REG), contingency (CON), dispatchable (DIS) and interruptible (ILD)

reserves as determined by the System Operator. Reserve requirements are
provided by the System Operator in accordance with the Dispatch Protocol36. The
reserve requirements are used in the area reserve constraints of the MDOM.

1.3 Outage Schedule

The outage schedule contains the planned transmission line, equipment or facility
outages as approved by the System Operator. The outage schedule is provided by
the System Operator in accordance with the Dispatch Protocol. The outage
schedule overrides information such as bids, offers and telemetry data. The
outage schedule is used in the pre-processing to determine outage resources, so
that the resources are not considered in the dispatch optimization process.

1.4 Contingency List

The contingency list contains pre-defined line or equipment outage condition to

comply with the single outage contingency (N-1) criterion specified in the System
Security and Reliability Guidelines. This criterion specifies that the grid shall
continue to operate in the normal state following the loss of one generating unit,
transmission line, or transformer.

The list is used to implement contingency analysis in the dispatch optimization

process and is used in pre-processing to include additional constraints in the
system to comply with the single outage contingency (N-1) criterion. The
contingency list is provided by the System Operator in accordance with the
Dispatch Protocol.

1.5 Transmission Limits

The transmission limits contains the latest power transmission limits of

transmission lines and transformers as determined by the SO. The transmission
limit data imposed by the SO overrides the default transmission limit values of the
Market Network Model. This also enables the SO to selectively override the
transmission limit values of individual or groups of transmission lines for security
and reliability purposes. In pre-processing, this allows the combination of both

36
See Annex E, Dispatch Protocol.

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overridden and default transmission limit values for the Market Network Model to
be used in the transmission constraint of the MDOM. Transmission limits are
provided by the System Operator in accordance with the Dispatch Protocol.

1.6 Security Limits

The security limits contains the latest operating limits of generators and
transmission line branch groups (including the high-voltage direct current (HVDC)
link between Luzon and Visayas grids). The security limits are used by the System
Operator to override prevailing resource information such as minimum stable
loading (Gmin37), and maximum stable loading (Gmax) of generators and transmission
line branch group flow limits for power system security purposes. This overriding
constraint supersedes the registered resource limit information such as generator
Gmin and the maximum generation offered by the Trading Participant. After pre-
processing, the overriding security limit values affect all related constraint
equations that use resource limits and line or branch group flow limits. Security
limits are provided by the System Operator in accordance with the Dispatch
Protocol.

1.7 Load Pattern Data

The load pattern data contains the latest relative magnitudes of MW and MVar for
each customer node used for the Similar Day Load Forecast Methodology38 applied
in the market projections (DAP and WAP workflows of the MDOM). Load patterns
are provided by the System Operator in accordance with the Dispatch Protocol.

2 Trading Participants

2.1 Trading Participant Registration Data

Upon registration as WESM trading participants, they shall provide the following
information which becomes default inputs to the MDOM, subject to confirmation
by the SO:

• Generator limits (Minimum and maximum generator stable loading).

• Ramp-up and Ramp-down rates.
• Maximum response level for the relevant reserve type.

2.2 Generator Energy Offer

Generators shall submit their energy offer considering the following:

• At most ten (10) energy offer blocks per (aggregate) unit

37
Gmin is also known as Pmin and Gmax is also known as Pmax. Gmin and Gmax have been used only for consistency in
the formulation notation and parameter name.
38
See Load Forecasting Methodology, Annex C.

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• Shall be for a minimum block size of five (5) MW

• Monotonically increasing prices per block
• Ramp-Up rate (RRUP) and Ramp-Down rate (RRDN)
• Validity period of offers
• Operating range of the energy offer (upper and lower limit)

2.3 Resource Operating Reserve Offer

Resource (Generators or dispatchable loads) shall submit offers for operating

reserves considering the following:

• The operating reserve type which may be regulation, contingency,

dispatchable or interruptible load.
• At most three (3) operating reserve offer blocks per aggregate unit
• A minimum block size of one (1) MW
• Monotonically increasing operating reserve price per block
• Validity period of the operating reserve offer

2.4 Customer Demand Bid

Customers or loads that are classified as dispatchable loads may submit a

maximum proportion of the forecasted/scheduled load which may be interrupted.

Dispatchable loads shall submit offers considering the following:

• At most, ten (10) energy offer blocks per take-off point.

• Minimum block size of one (1) MW
• Monotonically decreasing prices per block
• Validity period of bids

2.5 Customer Forecast

Customers may opt to submit forecast for any particular trading interval subject
to the validation rules indicated in the Load Forecasting Methodology39 for WESM.

39
See Annex C, Load Forecasting Methodology.

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3 Market Operator

3.1 Market Network Model

The Market Network Model is the electrical representation of physical

transmission network elements, e.g. transmission lines, generators, transformers,
loads and breakers. It is based on the transmission network data provided by the
System Operator to the Market Operator.

3.2 Load Forecast

The Market Operator prepares nodal load forecasts used in the market projections
and real-time dispatch through the Similar Day Load Forecast and Load Predictor
methodologies, respectively, as described in the Load Forecasting Methodology.40

3.3 Constraint Violation Coefficient

Constraint Violation Coefficients (the “CVC’s”) correspond to the constraint

penalty values inputted by the Market Operator to the MDOM. CVCs are ranked and
graded such that if constraints are not satisfied, the MDOM will still continue to
find a solution but reflecting the CVC prices in the nodal prices.

ƒ Deficit Interruptible Load Reserve

ƒ Deficit Dispatchable Reserve
ƒ Deficit Regulating Reserve
ƒ Deficit Contingency Reserve
ƒ Nodal Value of Lost Load
ƒ Contingency
ƒ Under-generation/Over-generation
ƒ Base Case Constraint
ƒ Transmission Constraint Group (TCG) constraint

OUTPUT OF THE MDOM

The optimization process will produce the following outputs:

• System Marginal Price
• Generation Schedules
• Dispatchable Load Schedule
• Regulation Reserve Schedule
• Contingency Reserve Schedule
• Dispatchable Reserve Schedule
• Interruptible Load Reserve Schedule
• Generator Node Energy Price

40
See Annex C, Load Forecasting Methodology.

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• Load Node Energy Price

• Regional Reserve Prices for each Reserve Category
• Transmission Line flows
• Transmission Line and System Losses

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GLOSSARY OF FORMULATION INDICES, VARIABLES AND PARAMETERS

INDICES

The following indices are used

k indexes reserve types

k=1 refers to regulating reserve type
k=2 refers to contingency reserve type
k=3 refers to dispatchable reserve type
k=4 refers to interruptible load reserve type
i indexes resources (generators or dispatchable loads)
j indexes resource offers or bids
a indexes energy and reserve areas
l indexes transmission lines

PARAMETERS

Ed
Total number of dispatchable loads with energy demand bids.

Eg
Total number of generators with energy offers.

Total number of resources (generators or dispatchable load)

Er
with reserve offers.

Nk Total number of reserve resources for each reserve type “k”

PDBi,j The price per quantity element of the jth Energy Bid block of
the ith Dispatchable Load.
PGi,j The price per quantity element of the jth Energy Offer block
of the ith Generator (or dispatchable load).
PRi,j,k The price per quantity element of the jth Reserve Offer block
of the kth Reserve Type of the ith Resource.
The jth price of the Under Generation Penalty Cost Function
CVCUG j
for system energy balance corresponding to the amount of
QUG .
The jth price of the Over Generation Penalty Cost Function for
CVC OG j
system energy balance corresponding to the amount of QOG .

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CVC R j , k , a The jth price of the Reserve Penalty Cost Function for reserve
type k in reserve area a corresponding to the amount of QRk ,a .
CVCTCG j , a The jth price of the Transmission Constraint Group (TCG)
Penalty Cost Function corresponding to import/export
constraint at area a.
CVC BC j ,l The jth price of the Base Case Penalty Cost Function for
normal line limit violations of any line l.
CVC C j ,l The jth price of the Contingency Penalty Cost Function for
contingency line limit violations of any line l.
R req k , a The MW Reserve requirement of reserve type k in reserve
area a.
Gmax(t),i The time-varying input high limit for each generator i or the negative of
the time-varying input maximum load for each dispatchable load i.
Gmin(t),i The time varying input low limit for each generator i or Zero for each
dispatchable load i.
Gmin, RRDN ,i Ramp Limited minimum MW level of generator (or
dispatchable load) resource “i “.
Gmax,RRUP ,i Ramp Limited maximum MW level of generator (or
dispatchable load) resource “i “.

Gmax,i , j Maximum generator offer tranche j for resource i.

PDi ,a
The MW quantity of the ith Load in area a.

Roffer max,i ,k ,a Maximum reserve limit from the offer for category k for
resource i in reserve area a.
Rramp max,i ,k ,a Maximum reserve ramp-time-limited for category k of
resource i in reserve area a.
ImportLimita Import MW limit of area a corresponding to the HVDC line MW
flow limit.
ExportLimita Export MW limit of area a corresponding to the HVDC line MW
flow limit.
RRUPi Ramp-up rate of generator (or dispatchable load) resource i.

RRDNi Ramp-down rate generator (or dispatchable load) resource i.

Gmin,i Minimum stable loading of generator i. (also known as Pmin)

Gmax,i Maximum registered capacity of generator i.

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[B] A matrix of transmission network admittance.

[H ] A matrix of line-node references (with +/- admittance

elements for both ends of a line).
[ PL ] A vector of transmission line limits.

Bl Admittance of the line l.

PL ,l Transmission line limit of line l.

Sensitivity Coefficient matrix defining the variation of line

[a] flows as a function of nodal injection changes calculated by
NSA and supplied to NCD.

VARIABLES

Gi,j The MW quantity of the jth Energy Offer block of the ith
Generator (or dispatchable load).
Ri,j,k The MW quantity of the jth Reserve Offer block of the kth
Reserve Type of the ith Resource.
DBi,j The MW quantity of the “jth“ Energy Bid block of the ith
Dispatchable Load.
The sum of penalty costs for soft constraints violations based
CVP
on the constraint violation coefficients.
The MW quantity by which the system load exceeds the
QUG
system generation.
The MW quantity by which the system generation exceeds the
QOG
system load.

Q Rk , a The MW quantity by which the operating reserve requirement

of type k for reserve area a was not satisfied.
The MW quantity by which the import/export limit of
QTCGa corresponding Transmission Constraint Group (TCG) for area a
is violated.
QBCl The MW quantity by which the line limit of any line l is
violated.

QCl The MW quantity by which the contingency line limit of any

line l is violated.

PLoss ,a Sum of all network losses in area a.

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QTCGa ,import
The MW value of the import limit that was violated (slack
variable for energy import constraint for area a).

QTCGa ,export
The MW value of the export limit that was violated (slack
variable for energy export constraint for area a).

The MW level of generator resource i that is Gi = ∑ Gi , j where

Gi j

j denotes the offer tranche.

Reserve schedule for resource i of reserve type k in reserve
Ri ,k area a that is Ri ,k = ∑ Ri , j ,k where j denotes the offer(or bid)
j

tranche.
Maximum Reserve contribution for reserve type k of resource
i in reserve area a which is the minimum of Roffer max,i ,k ,a and
Rmax,i ,k
Rramp max,i ,k ,a

The MW schedule of Dispatchable Load i that is

DBi DBi = ∑ DBi , j where j corresponds to the bid tranche.
j

Pn Net power injection for each node.

Pflowm ,n Power flow in the line between nodes m and n.

[θ ] A matrix of nodal angles.

[ Pn ] A matrix of nodal power injection

Angle difference between sending and receiving nodes for
∆θ l line l.
Sensitivity coefficient defining the variation of line flow in
ai ,l line l as a function of nodal injection changes by resource i
calculated by in NSA and supplied to NCD.

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OBJECTIVE FUNCTION

Maximize the Economic Gain from trade, where:

Economic Gain = ∑ 

E EG ER NK

∑j ( DBi, j )( PDBi, j ) − ∑i ∑j ( Gi, j )( PGi, j ) − ∑i ∑ ∑ ( R )( PR ) − ( CVP ) 
D

i , j ,k i, j ,k
 i k j 
i ∈ resources (generators and dispatchable loads)
j ∈ energy and reserve offer blocks
k ∈ reserve types

CONSTRAINT VIOLATIONS PENALTY COST

The Constraint Violation Penalty Cost is defined as follows:

CVCUG j (QUG ) + CVC OG j (QOG )

+∑ ∑ [CVC (Q )]+ ∑ [CVC (Q )]
R j ,k ,a Rk , a TCG j , a TCGa
k a a
CVP =
+∑ [CVC (Q )]+ ∑ [CVC (Q )]
BC j , l BCl C j ,l Cl
l l

j ∈ constraint violation coefficient block

k ∈ reserve types
a ∈ energy and reserve area
l ∈ transmission lines

OPTIMIZATION CONSTRAINTS

In the optimization process, the following constraints must be observed.

1. System Energy Balance Constraint

∑∑
i j
Gi , j + QUG = ∑ PDi + ∑ PLoss , a + QOG
i a

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If no under-generation or over-generation is present, QUG and QOG are zero. The

two terms are also known as “slack-variables” in optimization theory.

2. Regional Energy Import/Export Constraints

The amount of energy a region could import/export must not violate its scheduled
resource and load.

∑∑
i j
Gi , j ,a − ∑ PDi ,a − PLoss ,a + QTCGa ,import ≥ ImportLimita
i

and

∑∑
i j
Gi , j ,a − ∑ PDi ,a − PLoss ,a + QTCGa ,exp ort ≥ ExportLimita
i

With no import/export violation, QTCGa ,import and QTCGa ,export are zero.

3. Area Reserve Requirement Constraint

The reserve requirement for each area shall only be satisfied by local generators on each
specified area “a.”

For Regulating Reserve requirement in reserve area a.

∑∑
i j
Ri , j , k + QRk ,a = R req k ,a , k=1 and i∈ facilities in reserve area a

For Contingency Reserve requirement in reserve area a.

∑∑
i j
Ri , j , k + Q Rk ,a = R req k , a , k=2 and i∈ facilities in reserve area a

For Dispatchable Reserve requirement in reserve area a.

∑∑
i j
Ri , j , k + QRk ,a = R req k ,a , k=3 and i∈ facilities in reserve area a

For Interruptible Load Reserve requirement in reserve area a

∑∑
i j
Ri , j , k + QRk ,a = R req k ,a , k=4 and i∈ facilities in reserve area a

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4. Resource Energy Constraint

For a dispatchable resource (i.e. generator or dispatchable load), a number of

limits are applied which covers the ramp capability to satisfy its energy schedule:

• Maximum operating capability denoted by Gmax,RRUP,i,(t)

• Minimum stable generation denoted by Gmin,RRDN,i,(t)
• Ramp-Up Rate denoted by RRUP
• Ramp-Down Rate denoted by RRDN

The high and low operating limits (Gmax,RRUP,i,(t) , Gmin,RRDN,i,(t) ) are the generating limits used
for a given time point (t). They are a function of the operating capability, minimum generation
and ramp rates.
Where:
Gmax,RRUP,i (t+1) = Gmax,RRUP, i (t) + ∆ t *RRUP
Gmin,RRDN, i (t+1) = Gmin,RRDN, i (t) - ∆ t *RRDN
∆ t = 1 hour 41
The Resource Energy Constraint, therefore, is:

Gmin, RRDN ,i ≤ Gi ≤ Gmax,RRUP ,i

where
Gi = ∑ Gi , j j ∈ generator offer tranche of resource i
j

and the size of each offer tranche is respected:

Gi , j ≤ Gmax,i , j

In addition to ramping limits the Resource Energy Constraint is implemented in

conjunction with two further sources of constraint that must be respected:
• The maximum offer quantity.
• The stable minimum and maximum operating limits.

41
At present the trading interval is set at 1 hour. The MMS may be configured in the future to operate at a shorter
trading interval.

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Respecting the participant offers for resource i gives the constraint:

Gi ≤ Gmax,i,J

Where J is the highest offer made for resource i.

The minimum stable operating limit must be always equal to the registered
minimum stable operating limit, Gmin,i. Hence the constraint:

Gmin,i ≤ Gi ≤ Gmax,i

Where the resource is also offering reserves, this energy constraint is replaced by
a constraint that combines the energy and reserves limits. This will be discussed in
later sections.

5. Reserve Resource Constraint

Reserve schedule from a generator depends on its relationship with energy and
reserve effectiveness factors.

For a generator, its maximum reserve contribution is capped by Rmax,i ,k the

maximum reserve contribution for reserve type k of resource i. The maximum
contribution is the minimum of Roffer max,i ,k ,a (maximum reserve limit from the
resource i offer) and Rramp max,i ,k ,a (ramp-limited capacity of resource i). The reserve
resource constraint therefore is:

Ri ,k ≤ Rmax i ,k = min (Roffer max,i , j ,k ,a , Rramp max,i ,k ,a )

The size of each offer tranche is respected:

Ri,j,k ≤ R max,i,j,k

Ri,k ≤ Σ Ri,j,k

6. Reserve-Energy Generation Constraint

The energy and reserve schedules are “co-optimized” by observing the following
constraints.

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6.1. Regulation Headroom Constraints

The head-room constraint is imposed on regulating reserve resources (k=1) in

order to schedule the energy output (Gi) of the generator resource “i” with
consideration of its minimum stable generation limit (Gmin,i).

Gi − Ri ,k =1 ≥ Gmin,i

6.2. Reserve and Energy Constraints

The maximum stable generation of generator resource “i” must not be violated in
the energy and reserve scheduling by imposing the following constraint.

( Ri ,k =1 + Ri ,k =2 + Ri ,k =3 ) + Gi ≤ Gmax,i

This is the same for the interruptible load reserve category (ILD, k=4).
Interruptible load reserve schedule for customer i should be less than or equal to
energy schedule for dispatchable load (DB) for customer i.

Ri ,k = 4 ≤ DBi

7. Transmission Constraint

Transmission constraints are derived from the nodal energy balance constraints and
line flow constraints. The nodal energy balance is defined as:

[ Pn ] = [ B ][θ ]

The line flow constraint for any line “l” from bus m to bus n is defined as

Pflowm ,n ≤ PL ,l

While the line flow constraints are defined as,

[ H ][θ ] ≤ [ PL ]

For an individual transmission line l, the flow constraint has the following form:
Bl ∆θl ≤ PL ,l

Substituting the nodal power balance equation into the line flow constraints equation
and defining sensitivity matrix [a] as [a ] = [ H ][ B ] −1 , the line flow constraints, in
sensitivity form, is
[a ][ Pn ] ≤ [ PL ]

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For an individual transmission line l, the flow constraint, in sensitivity form, is

expressed as

∑i
ai ,l Pi ≤ PL ,l where Pi = Gi ,

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Appendix III-2 - Tie-Breaking Policy- Illustrative Example

The WESM tie-breaking policy is to consider the trading participants with equal offers in the
dispatch optimization on a pro-rata basis.

In the event that there are two or more equivalent offers providing two or more optimal
schedules, the dispatch requirements shall be pro-rated. The prorating rules will be based on the
size of the MW Block of the price curves containing the non-unique schedules. Only that part of
the price curve within the bid/offer’s availability region will be used. This policy is simple, fair,
and cost-effective to implement.

Consider the following example.

EXAMPLE 1

Generator A has a maximum capacity of 70 MW while Generator B has a maximum

capacity of 90 MW (Figure 10. Generator A and B are both at the same location and have
the same offer price curve (Figures 2 and 3).

140 MW

Figure 1

Offer Block of Gen A.

Peso/MW

2000

800
MW

30 50 70
Figure 2

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Offer Block of Gen. B

Peso/MW

2000

800
MW

30 50 90

Figure 3

Contestable energy offer block (for tie-breaking)

Offer block already cleared for dispatch

Givens:

Locational Marginal Price = P2,000

Total Load = 140 MW

Solution:

Both generators have the same price but their Pmax are different. Initially, both
generators will supply the 100 MW by dispatching 50 MW each. The remaining 40 MW will
be dispatched as follows:

Generator A:

Remaining Output MW = 70MW – 50MW = 20 MW

Generator B:

Remaining Output MW = 90MW – 50MW = 40 MW

The remaining MW will be pro-rated as follows:

 40 MW 
Gen_A = 20 MW * 
 40 MW + 20 MW 

= 13.33333 MW

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 40 MW 
Gen_B = 40 MW *  
 40 MW + 20 MW

= 26.6666667 MW

Hence,

Gen_A + Gen_B = 13.33333 MW + 26.6666667 MW = 40 MW

Figures 4 and 5 present the resulting dispatch from this example.

Generator A

Peso/MW

2000

800
MW

30 50 70
Figure 4

Generator B

Peso/MW

2000

800
MW

30 50 90

Figure 5

Remaining available energy in the offer block

Dispatched quantity after tie-breaking

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EXAMPLE 2

The following example illustrates how the tie-breaking policy applies if the quantity and
prices are the same:
The same conditions as in Example 1 are applied but with Generators A and B having
equal price and quantity blocks.
Offer Block of Gen A.

Peso/MW

2000

800
MW

0 40 120

Figure 6

Offer Block of Gen. B

Peso/MW

2000

800
MW

0 40 120

Figure 7

Contestable energy offer block (for tie-breaking)

Dispatched quantity before tie-breaking

Given:
Total Load = 140 MW

Solution:

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Both generators have the same price and generation offer quantity available. Since both
generators have a Pmin of 40 MW, this will be automatically dispatched (shown as orange
blocks in Figures 6 and 7). This leaves a remainder of 60 MW of energy of the total
140MW demand.

The graphs show that there is still 80MW of energy available from the generation offer
blocks of each of the two generators. The tie-breaking formula is then applied to
calculate the amount of dispatch for each generator to satisfy the remaining energy
requirement of 60MW:

Dispatch of Gen = energy offer block size x ( generation needed / total available
energy)

Energy offer block size = 80MW for both Gen A and Gen B.
Generation needed = 140MW – (2 x 40MW) = 60MW
Total available energy = ∑(energy offer block size)
= 80MW + 80MW = 160MW
Thus,

Dispatch of Gen A = 80MW * (60MW / 160MW) = 30MW

Dispatch of Gen B = 80MW * (60MW / 160MW) = 30MW

So that,

Gen A + Gen B = 30MW + 30MW

= 60MW.

The final dispatch of the generators will then be:

Generator Dispatch = Dispatched Quantity before tie-breaking

+ Pro-rated dispatch of offer block after tie-breaking

Hence,
Generator A = 40MW + 30MW
= 70MW

Generator B = 40MW + 30MW

= 70MW

The resulting dispatch schedule are shown in figures 8 and 9 below:

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Offer Block of Gen A.

Peso/MW

2000

800
MW

0 40 70 120

Figure 8

Offer Block of Gen. B

Peso/MW

2000

800
MW

0 40 70 120

Figure 9

Remaining available energy in the offer block

Dispatched quantity after tie-breaking

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Glossary of Terms

Terms Definition
A
Act Refers to republic Act no. 9136 also known as the
“Electric Power Industry Reform Act of 2001”.
Administered Price Cap A price cap imposed by the Market Operator to
the trading participants during market
suspension and intervention to be used for
settlements. Said price cap shall be developed
and published by the Market Operator for ERC
approval.
Algorithm The process/processes applied by the MDOM in
computing the dispatch schedules and prices.
Ancillary Services Provider A person or entity providing ancillary services
and registered as such with the Market Operator.
B
Bilateral Contract A contract between parties, the net effect of
which is that a defined quantity of electricity has
been sold by one party to another, at a particular
node.
C
Central Dispatch The process of scheduling by the Market
Operator and issuing direct instructions to
electric power industry participants by the
System Operator to achieve the economic
operation of the transmission system while
maintaining its quality, stability, reliability and
security.
Constraint A limitation on the capability of any combination
of network elements, loads generating units or
ancillary service providers such that it is, or
deemed by the System Operator to be,
unacceptable to adopt the pattern of transfer,
consumption, generation or production of
electrical power or other services that would be
most desirable if the limitation were removed.
Constraint violation A constraint is violated when the loadings of
network elements, loads generating units or
ancillary services providers involved in that
constraint combine in such a way as to exceed
the limit specified by that constraint.
Constraint Violation The price associated with the Constraint
Coefficient Price Violation Coefficients.

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Terms Definition
Constraint Violation Coefficients set by the Market Operator in
Coefficients accordance with WESM Rules clause 3.6.2. The
Market Operator is to ensure that, if constraints
shall be violated, such violation will occur in
appropriate priority order.
Contingency List Contains the definition of credible contingencies
for power system security analysis. It includes a
list of pre-defined outage scenarios that are most
likely to occur in the system in faulty conditions.
Customer Load Forecast The hourly demand forecast provided by
customers at their respective market trading
node as defined in the Market Network Model,
which forecast is to be used in the determination
of market projections and real time dispatch in
accordance with WESM timetable.
Customer Pricing Zone A zone within which all customers will face the
same price for electricity consumed, as published
by the Market Operator in accordance with WESM
Rules clause 3.2.3.1.
D
Day Ahead Dispatch Process A pre-dispatch process covering the results
obtained in the day-ahead projections.
Demand Bid A standing bid or market bid to buy electricity
submitted, or such bid revised by a customer in
accordance with clauses 3.5.6, 3.5.9, 3.5.12, or
3.5.13, and containing the information specified
in Appendix A1 of the WESM Rules.
Dispatch The act by which the System Operator initiates
all or part of the response offered or bid by a
scheduled generating unit or scheduled load in
accordance with clause 3.8.2 of WESM rules.
Dispatch Schedule The target loading levels in MW for each
scheduled generating unit or scheduled load and
for each reserve facility for the end of that
trading interval, determined by the Market
Operator through the use of market dispatch
optimization model in accordance with WESM
Rules clause 3.8.1.
Dispatchable load A load which is able to respond to dispatch
instructions and so may be treated as a
scheduled load in the dispatch process.
DOE The Department of Energy which is government
agency created pursuant to Republic Act No.
7638 and whose expanded functions are provided
in the Act.

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Terms Definition
E
Economic gain The benefit that will be received by consumers in
the economic dispatch optimization.
Economic Rental Means, for a constraint in the market dispatch
optimization model where the constraint is in
linear programming canonical form (that is, for a
maximizing optimization model, the sum of the
variable terms is less than or equal to the
constant term), the shadow price of the
constraint multiplied by the constant term of
said constraint.
Emergency An event or situation described in clauses 6.3.1.1
and 6.3.1.2 of the WESM Rules
End-user Any person or entity requiring the supply and
delivery of electricity for its own use.
Energy Generally, active energy and/or reactive energy.
For purposes of this document, means active
energy only.
Energy Balance Equation An equation determined by the Market Operator
in accordance with WESM Rules clause 3.6.1.4
(c), representing the balance between
generation, load and transmission flows at a
particular node of the market network model.
Energy Management System A system of computer-aided tools used by the
(EMS) System Operator to monitor, control, and
optimize the performance of the generation and
transmission systems.
Energy Regulatory The independent, quasi-judicial regulatory body
Commission created under the Act, otherwise ERC or
Commission.
Ex-Ante A matter determined in relation to a trading
interval before that trading interval commences.
Ex-Ante Dispatch Process Process where dispatch targets is set for the
end of a trading interval, immediately
preceding the beginning of that trading interval.
Ex-Ante Energy Settlement The ex-ante nodal energy price or the ex-ante
Price zonal reserve price, as may be appropriate,
determined in accordance with clause 3.10.2 or
clause 3.10.3, both of the WESM Rules.
Ex-Ante Energy Settlement The gross amount determined by the Market
Quantity Operator in accordance with WESM Rules clause
3.13.5, and adjusted for bilateral contracts in
accordance with clause 3.13.7.

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Terms Definition
Ex-Ante Energy Trading Determined as the ex-ante energy settlement
Amount price for a node in a trading interval multiplied
by the ex-ante energy settlement quantity (in
MWh) for that node in that trading interval.
Ex-Ante Nodal Energy Price The price determined by the Market Operator for
a particular market network node and trading
interval, immediately prior to commencement
of that trading interval, directly from the dispatch
optimization for that trading interval in
accordance with WESM Rules clause 3.10.2.

Ex-Post A matter determined in relation to a trading

interval after that trading interval concludes.
Ex-Post Dispatch Process Process where dispatch is set for the end of a
trading interval, immediately after the trading
interval concludes.
Ex-Post Energy Settlement The ex-post nodal energy price or the ex-post zonal
Price energy price, as appropriate, determined in
accordance with WESM Rules clause 3.10.9
Ex-Post Energy Settlement The amount determined by the Market Operator
Quantity accordance with WESM Rules clause 3.13.6.
Ex-Post Energy Trading The ex-post energy settlement price for a node
Amount in a trading interval multiplied by the ex-post
energy settlement quantity for that node in that
trading interval (in MWh); minus the ex-post
energy settlement price for that node in that
trading interval multiplied by the ex-ante energy
settlement quantity for that node in that trading
interval (in MWh).
Ex-Post Nodal Energy Price The price determined by the Market Operator for
a particular market node and trading interval,
after the end of that trading interval in
accordance with WESM Rules clause 3.10.6.
F
Facility A generic term associated with apparatus
equipment, buildings and necessary supporting
resources for the generation, transmission,
supply, sale and consumption of electricity.
Financial Transmission Right The right to financial compensation based on
differences between nodal energy prices at
different market trading nodes.
Formulation A mathematical representation of an
optimization model.
G

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Terms Definition
Generating facility A facility, consisting of one or more generating
units, where electric energy is produced from
some other form of energy by means of a suitable
apparatus.
Generating unit A single machine generating electricity and all
the related equipment essential to its functioning
as single entity and having a nameplate rating of
one (1) MW or more.
Generation The production of electrical power by converting
one form of energy to another in a generating
unit.
Generation offer A standing offer, or market offer to supply
electricity, submitted or revised by a generation
company in accordance with WESM Rules clauses
3.5.5, 3.5.9, 3.5.10 or 3.5.11.
Generator node A market trading node at which electricity will
normally be sold to the spot market and which is
classified as a generator node in accordance with
WESM Rules clause 3.2.2.2.
Grid The high voltage backbone system of
interconnected transmission lines, substations
and related facilities, located in each of Luzon,
Visayas and Mindanao, or as may otherwise be
determined by the ERC in accordance with
Section 45 of the Act.
Gross Pool The dispatch model where all energy is traded
through the WESM.
I
Intervention A measure taken by the System Operator when
the grid is in extreme state condition as
established in the Philippine Grid Code arising
from a threat to system security, force majeure
or emergency. During such event, the
administered price cap shall be used for
settlements In the WESM
L
Linear Programming A mathematical procedure for minimizing or
maximizing a linear function of several variables,
subject to a finite number of linear restrictions
on these variables.
Line rental The economic rental arising from the use of a
transmission line, calculated as the difference in
value between flows out of the receiving node of
the line and flows into the sending node, in
accordance with WESM Rules clause 3.13.12.

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Terms Definition
Load The amount of energy consumed in a defined
period via node.
Load Forecast Has the same meaning as net load forecast
Load Pattern Represents the relative magnitudes of MW and
MVar values on individual loads. The load
pattern data is used to distribute system/zonal
load to individual loads, i.e. nodal load.
Locational Marginal Price This is the marginal value of the objective
(LMP) function at each bus at the solution of the
optimization problem.
M
Marginal Plant The generating unit or plant whose price offer
corresponds to the system marginal price for a
given trading interval.
Market Dispatch The optimization model which contains the
Optimization Model (MDOM) mathematical algorithm approved by the PEM
Board to be used for the purposes of determining
dispatch schedules and energy prices, and
preparing market projections based on the price
determination methodology approved by the
ERC.
Market Network Model A mathematical representation of the power
system, which will be used for the purpose of
determining dispatch schedules and energy
prices, and preparing market projections.
Market Offer A generation offer for a particular trading
interval of a particular trading day in the current
market horizon, whether formed from a standing
offer in accordance with WESM Rules clause
3.5.10 or revised by the relevant trading
participant in accordance with WESM Rules clause
3.5.11.
Market Operator The entity responsible for the operation of the spot
market governed by the PEM Board in accordance
with WESM Rules clause 1.4 which, for the
avoidance of doubt, is the Autonomous Group
Market Operator (the “AGMO”) for a period of
twelve months from the spot market
commencement date and thereafter the entity to
which the functions, assets and liabilities of the
AGMO are transferred in accordance with Section
30 of the Act.

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Terms Definition
Market Price A generic term covering prices for energy and
reserve, ex-ante or ex-post, nodal or zonal, as
appropriate.
Market Suspension An event wherein the ERC declares the operation
of the spot market to be suspended in cases of
natural calamities or national and international
security emergencies. During such event, the
administered price cap shall be used for
settlements in the WESM.
Market Trading Nodes Those nodes at which electricity will be either
bought or sold from the spot market, defined in
accordance with clause 3.2.2 of the WESM Rules.
Market Transaction A sale or purchase of electricity, or other services,
made through the spot market.
Meter A device which measures and records the
consumption or production of electricity.
Metering Point The point of physical connection of the device
measuring the current in the power conductor.
MW block Represents the quantity portion of the market
offers/bids of the trading participants.
N
Net Load Forecast A forecast, prepared in accordance with the
procedures developed under WESM Rules clause
3.5.4, of the load, net of any non-scheduled
generation, to be matched, along with any
scheduled load, by generation from scheduled
generation facilities.
Net Settlement Surplus The settlement surplus remaining after all market
transactions have been accounted for. This
remainder is assumed to be attributable to
economic rentals arising from other binding
constraints. Also termed settlement surplus
Network Data These are electrical parameters used to
represent the transmission system or network.
Network Service Provider A person or entity that engages in the activity of
owning, controlling, or operating a transmission or
distribution system and who is registered with the
Market Operator in that capacity under WESM
Rules clause 2.3.4.
Nodal Energy Price The energy price at a node determined ex ante or
ex-post. This is also the Locational Marginal Price
(the “LMP”) in the WESM.
Node A connection point on a network, or junction
point within a network model, whether physical
or notional.

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Terms Definition
Non Dispatchable Load The MW energy requirement of non-dispatchable
Energy load.
O
Objective Function Function to be minimized or maximized,
representing, e.g., cost or profit.
Opportunity Cost The economic loss suffered by some party as a
result of losing an opportunity, such as the
opportunity to sell energy in the spot market.
Outage Schedules Schedule for shutting down or de-rating of
generation and transmission facilities
Over generation Constraint Violation Coefficient for the system
condition whereby the generation in the system
exceeds the total demand. This also corresponds
to system energy balance constraint. This
condition is also known as excess generation.
P
PEM Board The group of directors serving from time to time
on the board that is responsible for governing the
WESM.
Plant Any equipment involved in generating, utilizing or
transmitting electrical energy.
Power System The integrated system of transmission and
distribution networks for the supply of electricity in
the Philippines.
Price Curve The price curve of a generator energy offer is
defined by up to ten (10) blocks as follows: the
nth block (P/MW) defines the price between the
nth and (n+1st) MW points. The last non-zero MW
break point and slope (P/MW) defines the price
until the maximum generation. The blocks must
be monotonically non-decreasing.
Price Determination A document which provides specific details as to
Methodology how dispatch schedules and locational marginal
prices (nodal prices) are calculated in the Market
Dispatch Optimization Model (MDOM) as provided
in clause 3.6 of the WESM Rules.
R

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Terms Definition
Receiving node For a transmission line, the node from which there
is a net flow of electricity out of that line in a
particular trading interval to be accounted for
in determining the line rental, in accordance with
WESM Rules clause 3.13.12. For a transmission
right, the node to which the issuer of the
transmission right is deemed to guarantee transfer
of electricity, to be advised to the Market
Operator in accordance with WESM Rules clause
3.13.2.
Regional Reserve Price The price for reserve in a particular supply zone,
and trading interval, determined in accordance
with WESM Rules clause 3.10.10. Also known as
zonal reserve price.
Reserve Category A particular kind or class of reserve as provided
for in WESM Rules clause 3.3.4.2. These are
regulating, contingency, dispatchable and
interruptible load reserves.
Reserve Offer A standing offer or market offer to supply
reserves, submitted or revised by a customer or a
generation company in accordance with WESM
Rules clauses 3.5.7, 3.5.8, 3.5.10 or 3.5.11.

Reserve Requirements Demands for regulation reserve, contingency

reserve and other relevant types of reserves.
They are determined based on system loading,
maximum generator tripping and other
considerations
Reserve Region A zone of the power system from which a particular
or Reserve Zone reserve category can be supplied to meet a
particular locationally specific requirement.
Run A particular instance of the market dispatch
optimization model performed for a particular
trading interval, or a set of such instances of the
model performed for all the trading intervals in a
market horizon.
S
Security-constrained Process of apportioning the total load on a
economic dispatch system between the various generating plants to
achieve the greatest economy of operation and
taking account of the limitations of the power
system.
Scenario A net load forecast covering a market horizon.

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Terms Definition
Scheduled Load A load which is able to respond to dispatch
instructions, and has been bid into the spot
market using a demand bid and so may be
scheduled and dispatched via the scheduling and
dispatch procedures.
Security limits Limits imposed by the System Operator on
generation and transmission equipment to
maintain system security and reliability.
Self-commitment The principle whereby participants assume full
responsibility for how and when their plants are
operated.
Sending node For a transmission line, the node into which
there is a net flow of electricity out of that line
in a particular trading interval to be accounted
for in determining the line rental in accordance
with WESM Rules clause 3.13.12. For a
transmission right, the node from which the issuer
of the transmission right is deemed to guarantee
transfer of electricity, to be advised to the Market
Operator in accordance with WESM Rules clause
3.13.2.
Settlement The activity of producing bills and credit notes for
WESM Members in accordance with clause 3.13,
and with the processes defined in clause 3.14, both
of the WESM Rules.
Settlement Amount The amount payable by or to a trading participant
in respect of a billing period as determined by the
Market Operator under WESM Rules clause 3.13.14.
Settlement Price An ex-ante or ex-post energy settlement price.
Settlement Quantity An ex-ante or ex-post energy settlement
quantity, or a zonal reserve settlement
quantity.
Settlement Surplus The settlement surplus remaining after all
market transactions have been accounted for.
This remainder is assumed to be attributable to
economic rentals arising from other binding
constraints.
Spot Market The wholesale electricity spot market (WESM).

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Terms Definition
Standing Bid / Offer A standing offer to sell energy or reserve, or a
bid to buy energy, submitted by the relevant
trading participant in accordance with WESM
Rules clauses 3.5.5, 3.5.6, 3.5.7 or 3.5.8, and
revised from time to time in accordance with
WESM Rules clause 3.5.9, and effective until
overridden by submission of a specific market
offer in accordance with WESM Rules clause
3.5.11
State Estimator A system forming part of the Energy Management
System of the System Operator which determines
the status of the power system through system
snapshots.
Supplier Any person or entity licensed by the ERC to sell,
broker, market or aggregate electricity to end-
users, and registered with the Market Operator as
a customer under WESM Rules clause 2.3.2.
Supply The sale of electricity by a party other than a
generation company or a distribution utility in the
franchise area of a distribution utility using the
wires of such distribution utility.
System marginal price The price set by the marginal plant scheduled in
any trading period or interval.
System Operator The party identified as the System Operator
pursuant to the Philippine Grid Code which is the
party responsible for generation dispatch, the
provision of ancillary services, and operation and
control to ensure safety, power quality, stability,
reliability and security of the grid.
System Snapshot The power system status at a certain time and is
generated by the state estimator in the Energy
Management System of the System Operator.
T
Tie Breaking Rules Prorating rules which are based on the size of the
MW Block of the price curves containing the non-
unique schedules.
Timetable The timetable prepared by the Market Operator
for operation of the spot market in accordance
with WESM Rules clause 3.4.2.
Trading Amount The amount to be paid by, or paid to a trading
participant, or Network Service Provider in
respect of energy, reserve, line rentals, or
transmission rights calculated in accordance with
WESM Rules clauses 3.13.7, 3.13.8, 3.13.9,
3.13.10, or 3.13.14 respectively.

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Terms Definition
Trading interval A 1-hour period commencing on the hour.
Trading Participant A customer or generation company.
Transmission Constraint Constraint Violation Coefficient for the import-
Group export constraint between two regions or areas
of the power system.
Transmission limits Generally, thermal limits of individual
transmission facilities.
Transmission Line A power line that is part of a transmission network
Transmission Loss Factor Scaling factors applied on the nodal prices to
account for the network loss associated with the
delivery or consumption of energy at different
locations in the system.
Transmission Network A network operating at nominal voltages of 220 kV
and above plus:
(a) any part of a network operating at nominal
voltages between 66kV and 220 kV that operates
in parallel with and provides support to the
higher voltage transmission network;
(b) any part of a network operating at nominal
voltages between 66 kV and 220 kV that does not
operate in parallel with and provide support to
the higher voltage transmission network but is
deemed by the government to be part of the
transmission network.
Transmission System The transmission network together with the
connection assets associated with the
transmission network, which is connected to
another transmission or distribution system.
U
Under generation Constraint Violation Coefficient for the system
condition where the demand exceeds the total
maximum generation in the system. This also
corresponds to system energy balance constraint.
This is also known as deficit generation.
V
Voltage The electronic force or electric potential between
two points that give rise to the flow of electricity.
W
Week Ahead Dispatch Process A pre-dispatch process covering the results
obtained in the week ahead projections.
WESM Rules The detailed rules that govern the administration
and operation of the WESM.

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