Decision,+ERC+Case+No +2013-137+RC

Republic of the Philippines
ENERGY REGULATORY COMMISSIO

San Miguel Avenue, Pasig City
IN THE MATTER OF THE

APPLICATION FOR THE
APPROVAL OF THE LEVEL OF
MARKET TRANSACTION FEES
FOR CALENDAR YEAR 2014
FOR THE PHILIPPINE
WHOLESALE ELECTRICITY
SPOT MARKET (WESM)
ERe CASE NO. 2013-137 RC
PHILIPPINE ELECTRICITY
MARKET CORPORATION
(PEMC), OOCKUXIlD
Applicant. Date:.D.g~...9. ..1~.
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DECISION
Before the Commission for resolution is the application filed on

June 27, 2013 by the Philippine Electricity Market Corporation
(PEMC) for the approval of the level of Market Transaction Fees
(MTFs) for calendar year (CY) 2014 for the Philippine Wholesale
Electricity Spot Market (WESM).
In the said application, PEMC alleged, among others, the

following:
1. It is a non-stock, non-profit corporation duly organized

and existing in accordance with Philippine laws, with
principal office at the 9th Floor, Robinsons-Equitable
Tower, ADB Avenue corner Poveda Street, Ortigas
Center, Pasig City. It is represented by its President, Ms.
Melinda L. Ocampo, who is duly authorized by its Board
of Directors as evidenced by the Secretary's Certificate
attached to the application as Annexes "A-1" and "A-2"
and made integral parts thereof;
ERC CASE NO. 2013-137 RC
DECISION/October 15, 2014
Page 2 of 35
2. The instant application is filed pursuant to Section 30 of

Republic Act No. 9136, otherwise known as the "Electric
Power Industry Reform Act of 2001 (EPIRA)", which
reads:
"The cost of administering and

operating the wholesale electricity spot
market shall be recovered by the market
operator through a charge imposed on all
members; Provided, That such charge shall
be filed with and approved by the ERG.,,1
3. The instant application is filed within the period provided

by the Commission in its Decision dated January 30,
2008 in its CY 2007 Market Fees (MFs) Application2;
PROPOSED LEVEL OF MARKET FEES
4. The MTF applied for is Eight Hundred Fourteen Million

Five Hundred Twenty-Nine Thousand Pesos
(PhP814,529,000.00) broken down as follows:
a. Its budgetary requirements for CY 2014 in the

amount of Seven Hundred Ninety-Six Million
Twenty-Four Thousand Pesos
(PhP796,024,OOO.00); and
b. Eighty percent (800/0) of the Year 1 budget for the

Market Design and Structural Feasibility Study
(Forwards Market) and the Market Research and
Development Platform (MRDP) Projects in the
amount of Eighteen Million Five Hundred Five
Thousand Pesos (PhP18,505,000.00).3
1 See also Rule 9, Section 9 (a) of the Implementing Rules and Regulations (IRR) of the EPIRA
2 Docketed as ERC Case No. 2007-124 RC
3 PEMC also prayed for the recovery of the remainder (80%) of the proposed Year 1 budget for
the Forwards Market and MRDP Projects in its "Motion for Reconsideration" dated January 25,
2013 and "Manifestation and Omnibus Motion" dated May 27, 2013, both filed in connection
with its CY 2012 MTF application. Said "Motion for Reconsideration" and "Manifestation and
Omnibus Motion" are pending resolution by the Commission
Page 3 of 35
Budgetary Requirements for CY 2014
5. Its budgetary requirements for CY 2014 consist of the

following:
Bud et Com onents Amount

Personnel Services 388.641
Maintenance and Other
Operating Expenses 309.363
MODE
Capital Expenditures 82.412
(CAPEX
Provision for the
Department of Energy 15.608
(DOE)/Energy Regulatory
Commission (ERC)
Monitorin Facilities
Total 796.024
Table 1 - CY 2014 Budgetary Requirements, in PhP Million
5. The PS pertains to the salaries and benefits of one

hundred sixty (160) employees in Luzon and Visayas;
6. The MODE includes, among others, honorarium, rent,

utilities, repairs and maintenance, contracted services,
insurance, training, travel and transportation, participant
development costs and the costs of the market audit
required under the WESM Rules;
7. The CAPEX consists of enhancements and upgrades to

the Market Management System (MMS) and corporate
infrastructure and the cost of lease improvements;
8. The Provision for the DOE/ERC Monitoring Facilities

equals two percent (20/0) of the proposed PS, MODE and
CAPEX budget for CY 2014 to support the monitoring
functions of the DOE and the Commission pursuant to its
Decisions in its previous MF Applications4;
4 See January 30, 2008 and June 22,2006 Decisions of the Commission in PEMC's CY 2007 and
CY 2006 MF Applications, docketed as ERC Case Nos. 2007-124 RC and 2005-048 RC,
respectively
Page 4 of 35
9. The Market Development Projects cover: a) the services

that are intended to improve the performance of its core
functions, e.g. Market Research and Development
Platform (MRDP); and b) the services that are not
inherently part of its core functions but are required by the
DOE or the Commission, e.g. Business-to-Business
(828) System for RCOA;
10. In preparing its budgetary requirements, it adjusted its

proposed PS budget for CY 2013 by eight percent (8%) to
account for the projected Consumer Price Index (CPI) in
CY 2014 (3%) and the rate approved by its Board of
Directors to cover reasonable annual performance
increases of its employees. In MODE, most of the
proposed amounts are based on the budgets approved by
the Commission5 or the actual costs it incurred for CY
2012, adjusted by the projected CPI for CY 2013 (3%)
and further adjusted by the projected CPI for CY 2014
(3%). Some amounts covered by contracts, such as
those for Rent and Market Audits, were escalated by ten
percent (10%). Proposed CAPEX costs are based on
estimates and quotations from suppliers;
11. A discussion of the specific budgetary allocations falling

within the foregoing cost components and their
justifications is attached as Annex uB" and is made an
integral part thereof;
Remainder (80%) of the Year 1 Budget for the Forwards

Market and MRDP Projects
12. The Forwards Market Project is a research and

development project with the primary objective of
developing a market design in support of the studies and
directives of the DOE regarding electricity derivatives;
13. The MRDP Project aims to establish a hardware and

software testing and development platform where market
modeling, simulation, design and development can be
conducted without actually investing into a full scale
production setup;
5 December 3,2012 Decision, PEMC's CY 2012 MTF application, ERC Case No. 2011-111 RC
Page 5 of 35
14. Its proposed budget for the Forwards Market and MRDP
projects are spread across its various MTF applications,
to wit:
Year 1 CYs
2010 - 2011 Year 2 CY Year 3 CY Total
Project MTF 2012 MTF 2013 MTF Project
A Iications 6
Ap lication A plication7 Cost
MRDP 14.400 9.200 6.000 29.600
Forwards 8.731 8.731
Market
Table 2 - Project Cost, in PhP Million
15. In its Decision in its CYs 2010-2011 MTF application, the

Commission approved an initial funding for the Forwards
. Market and MRDP projects equivalent to twenty percent
(200/0) of its proposed Year 1 budget. The Commission
also approved the proposed Year 2 budget for the MRDP
in its December 3, 2012 Decision in its CY 2012 MTF
application. The proposed Year 3 budget for the MRDP
was approved by the Commission in its Decision dated
July 8, 2013 in the MTF CY 2013 Application;
16. However, the approval of the entire project cost is

required to complete the Forwards Market and MRDP
Projects. Hence, the remainder (80%) of the proposed
Year 1 budget for these projects, in the amount of
Eighteen Million Five Hundred Five Thousand Pesos
(PhP18,505,000.00), is included in the instant
8
application . This amount may be broken down as
follows:
Required
Project Year 1 Year 1 Additional
Bud et A roval Fundin
MRDP 14.400 2.880 11.520
Forwards Market 8.731 1.746 6.985
Total 18.505
Table 3 - Required Additional Funding, in PhP Million
8 See Footnote 3
Page 6 of 35
17. The amounts proposed are net of applicable taxes, such

as corporate income and value added taxes. These also
do not cover possible changes in expenses due to
changes in law, rules or regulations, compliance with
other regulatory requirements and other external factors;
18. The following are not included in the instant application:
a) The Provisions for the Repayment of the MMS Loan

- On August 14, 2012, it filed a separate application
for the approval of additional MTF for the repayment
of the MMS Loan pursuant to the terms of the
Memorandum of Agreement (MOA) among the
National Power Corporation (NPC), National
Transmission Corporation (TRANSCO), Power
Sector Assets and Liabilities Management
9
Corporation (PSALM) and PEMC ; and
b) New MMS (NMMS) Project - It filed on September

15, 2011 a separate application for the approval of
additional MTF for the NMMS Project1O.
19. The MMS Loan and NMMS applications are pending

resolution by the Commission;
20. The MTF shall be apportioned among generators where

the WESM operates according to the volume traded by
each in the WESM pursuant to the approvals of the
Commission, as follows:
Total Annual Market Transaction Fee/12

Market Transaction Fee Rate (PhP/kWh) = -------------------------------------------------------
Total Generated Metered Quantity
21. Should the Commission approve its application for the

approval of the Pricing and Cost Recovery Mechanism for
Reserves to be traded in the WESM11, the MF shall be
apportioned among generators, as follows:

DECISION/October 15,2014
Page 7 of 35
Total Annual Market Transaction Fee/12

Market Transaction Fee Rate (PhP/kWh) = ------------------------------------------------------
Total Generated Metered Quantities
+ Total Scheduled Reserves
22. Based on initial indicative figures, the estimated MTF

Rate is PhPO.0125/kWh for CY 2014. This represents a
four percent (4%) reduction in its proposed MTF rate of
PhPO.0130/kWh for CY 2013;
23. The indicative MTF rate is based on the Luzon and

Visayas energy forecast of 63,789 GWh for CY 2014.
The energy forecast is attached to the application as
Annex "C" and is made an integral part thereof;
24. The prevailing market fee rate or MTF level approved by

the Commission shall continue to be implemented in CY
2014 pending the approval of the instant application; and
25. It prayed that after due hearing, its proposed MTF for CY
2014 in the amount of PhP814.529 Million be approved,
without prejudice to the resolution of its NMMS and MMS
Loan MTF applications.
Having found said application sufficient in form and in

substance with the required fees having been paid, an Order and a
Notice of Public Hearing, both dated July 29, 2013, were issued
setting the same for initial hearing, expository presentation, pre-trial
conference and evidentiary hearing on August 20, 2013 in Cebu City
and August 22, 2013 in Pasig City.
In the same Order, PEMC was directed to cause the publication

of the Notice of Public Hearing, at its own expense, twice (2x) for two
(2) successive weeks in two (2) newspapers of general circulation in
the Philippines, with the date of the last publication to be made not
later than ten (10) days before the scheduled date of the initial
hearing. It was also directed to inform the consumers within its
franchise area, by any other means available and appropriate, of the
filing of the instant application, its reasons therefor, and of the
scheduled hearing thereon.
Page 8 of 35
The Office of the Solicitor General (OSG), the Commission on

Audit (COA) and the Committees on Energy of both Houses of
Congress were furnished with copies of the Order and the attached
Notice of Public Hearing and were requested to have their respective
duly authorized representatives present at the aforesaid initial
hearing.
Likewise, the Office of the Mayor of Pasig City was furnished

with copies of the said Order and the Notice of Public Hearing, for the
appropriate posting thereof on its bulletin board.
On August 1, 2013, Manila Electric Company (MERALCO) filed

its "Petition for Intervention (with Entry of Appearance)".
On August 15, 2013, PEMC and MERALCO filed their

respective "Pre-trial Briefs".
On August 16, 2013, Engr. Robert F. Mallillin filed his "Motion to

Participate as Intervenor" and "Pre-trial Brief'.
During the August 20, 2013 initial hearing for the Visayas
stakeholders, only PEMC appeared. No intervenor/oppositor
appeared nor was there any intervention/opposition registered.
In the said hearing, PEMC presented its proofs of compliance

with the Commission's publication and posting of notice
requirements, which were duly marked as Exhibits "A" to "J-4",
inclusive. Thereafter, it conducted an expository presentation of its
application. The Commission propounded c1arificatory questions.
Subsequently, PEMC moved for a declaration of general

default. Said motion was granted.
During the August 22, 2013 hearing for the Luzon stakeholders,
PEMC, MERALCO and Engr. Mallillin appeared.
In the said hearing, PEMC conducted an expository

presentation of its application. Thereafter, the Commission,
MERALCO and Engr. Mallillin propounded their respective
c1arificatory questions.
Page 9 of 35
PEMC interposed an objection with respect to Engr. Mallillin's

intervention since he is not its customer as its customers are power
generators. Engr. Mallillin moved that he be given an opportunity to
rectify his "Motion to Participate as Intervenor". Said motion was
granted. Accordingly, he was given a period of five (5) days from
said date of hearing within which to submit the aforesaid rectified
motion.
Subsequently, a pre-trial conference was conducted among the

parties wherein they admitted and/or denied their respective
proposed stipulation of facts and issues.
The pre-trial conference having been terminated, PEMC

presented the following witnesses: 1) Ms. Marissa P. Gandia, its
Finance Manager, who testified, among others, on the following: a)
her participation in the preparation of the budget for CY 2014; b) the
approvals secured from PEMC's Board of Directors in connection
with the filing of the instant application; c) the justifications and details
of the budget applied for; d) the assumptions used in the preparation
of the budget; e) the background on the required additional funding
for the Market Design and Structural Feasibility Study (Forwards
Market Project) and the Market Research and Development Platform
(MRDP) Project; f) the costs that are not included in the instant
application; and g) the impact of the budget on the estimated MF rate
for CY 2014; 2) Mr. Salvador D. Subaran, its Systems Development
and Support (SDS) Manager under the Systems and Technology
Department, who testified, among others, on the following: a) the
description of the MRDP Project; b) the justification and details of the
budget applied for the MRDP Project; and c) the status of the MRDP
Project; and 3) Mr. Zigfred Nino C. Viray, its Corporate Planning
Manager, who testified, among others, on the following: a) the
description of the Forwards Market Project; b) the justification and
details of the budget applied for the Forwards Market Project; and c)
the status of the Forwards Market Project. In the course of their
respective direct examinations, various documents were presented
and duly marked as exhibits.
Thereafter, MERALCO conducted its cross-examination of the

said witnesses. On the other hand, Engr. Mallillin moved that his
c1arificatory questions during the expository presentation be
considered as his cross-examination to the aforesaid witnesses.
Upon termination of the cross-examination, the Commission

propounded c1arificatory questions and directed PEMC to submit
Page 10 of 35
various documents, within fifteen (15) days from said date of hearing,
and its formal offer of evidence (FOE), within ten (10) days from the
submission of the required documents. Relative thereto, MERALCO
and Engr. Mallillin were given a period of ten (10) days from receipt of
PEMC's FOE within which to file their respective comments thereon,
if they so desire.
MERALCO and Engr. Mallillin manifested that they would not

present any evidence.
The Commission would recall the parties for a clarificatory

hearing, if deemed necessary.
On August 27, 2013, Engr. Mallillin filed his rectified "Motion to

Participate as Intervenor".
On September 6, 2013, PEMC filed a "Compliance (Re: August

22, 2013 Hearing)" comprising of the Macro-economic Assumptions
from the Development Budget Coordination Committee (DSCC),
Forwards Market Write-up, MRDP Project Write-up and Demand
Forecast Write-up.
On September 16, 2013, PEMC filed its "Formal Offer of

Evidence with Motion for Additional Marking of Documents".
On October 7, 2013, MERALCO filed its "Comment (To

PEMC's Formal Offer of Evidence) with Motion (For Time to File
Memorandum)". Relative thereto, on October 17, 2013, PEMC filed
its "Reply to MERALCO's Comment (Re: PEMC's Formal Offer of
Evidence)".
On October 21, 2013, MERALCO filed its "Memorandum",

Relative thereto, on November 5, 2013, PEMC filed its "Comment
(Re: MERALCO's Memorandum)".
On December 23, 2013, the Commission issued an Order

authorizing PEMC to continue imposing the approved MF of CY 2013
in ERC Case No. 2012-084 RC, on the market participants in the
Luzon and Visayas WESM, pending the final resolution of the
proposed MF for CY 2014.
Page 11 of 35
On October 1,2014, the Commission issued an Order admitting

PEMC's "Formal Offer of Evidence" and declaring the instant
application submitted for resolution of the Commission.
DISCUSSION
Pursuant to Section 30 of the EPIRA, PEMC sought the

Commission's approval of its proposed budgetary requirements for
CY 2014 in the amount of PhP814,529,000.00 to be imposed on all
market participants in Luzon and Visayas, broken down as follows:
A. The amount of PhP796,024,000.00 for its budgetary

requirements for CY 2014, broken down into the following
budget components:
Budget Components In PhP

Total Personnel Services (PS) 388,641,000.00
Honorarium 34,216,000.00
Rental 38,812,000.00
Utilities 32,828,000.00
Repairs and Maintenance 33,632,000.00
Contracted Services 32,505,000.00
Conference 9,709,000.00
Insurance 11,228,000.00
Participants Development Costs 5,000,000.00
Advertising and Promotions 6,902,000.00
Taxes and Dues 9,835,000.00
Travel and Transportation 15,701,000.00
Trainings 9,965,000.00
Materials and Supplies 8,824,000.00
Subscriptions 6,023,000.00
Research and Development 6,066,000.00
Market Audit 48,117,000.00
Total Maintenance and Other
Operating Expenses (MOO E) 309,363,000.00
Provision for DOE and ERC Monitoring
Facilities 15,608,000.00
Total Capital Expenditures (CAPEX) 82,412,000.00
Total 796,024,000.00
Page 12 of 35
B. The amount of PhP18,505,000.00 for the remaining

eighty percent (80%) of the proposed Year 1 budget for
the Forwards Market and MRDP Projects, as discussed
below:
It is worthwhile to mention that the Commission, in its Decision

approving the CYs 2010-2011 MF Application, has already approved
the initial funding for the Forwards Market and MRDP Projects,
equivalent to twenty percent (200/0) of PEMC's proposed Year 1
budget. Thus, PEMC prayed for the approval of the remaining eighty
percent (80%) of the said budget in the amount of
PhP18,505,000.00.
On the other hand, the proposed budget for Years 2 and 3 was
approved by the Commission in its Decisions dated December 3,
2012 in ERC Case No. 2011-111 RC (MF Application for CY 2012)
and July 8,2013 in ERC Case No. 2012-084 RC (MF Application for
CY 2013), respectively.
Table 1
Year 1 Year 1 Required

Projects Proposed Commission- Additional
Bud et A roved Fundin
MRDP 14,400,000.00 2,880,000.00 11,520,000.00
Forwards Market 8,731,000.00 1,746,000.00 6,985,000.00
Total 18,505,000.00
Table 2
Year 1 Year 2 Year 3

Total
Projects CYs 2010-2011 CY 2012 CY 2013
(In million)
MF A Iication MF A Iication MF A Iication
MRDP 14,400,000.00 9,200,000.00 6,000,000.00 29,600,000.00
Forwards
8,731,000.00
Market 8,731,000.00
The indicative MF rate at a projected volume of 63,789 GWh for

Luzon and Visayas is PhPO.0128/kWh.
After a thorough evaluation of the instant application, the

Commission approves the amount of PhP702,984,727.73.00 as
PEMC's budgetary requirements for CY 2014, as shown below:
Page 13 of 35
Commission-
PEMC's Approved
Proposed Budget Variance
Particulars Budget (PhP) (PhP) (PhP)
PS 388,641,000.00 380,450,736.00 8,190,264.00
MOOE 309,363,000.00 249,017,530.00 49,881,470.00
CAPEX 82,412,000.00 61,077,000.00 21,335,000.00

Market
Enhancement
Projects 18,505,000.00 3,312,310.00 15,192,690.00
Provision for
ERC/DOE 15,608,000.00 13,877,152.00 1,730,848.00
Total Budgetary
Requirement 814,529,000.00 707,734,728.00 106,794,272.00
Unutilized MF for
CY 2013 4,750,000.00
Total Approved
MF for CY 2014 702,984,727.73
In evaluating the proposed budgetary requirements of PEMC

for CY 2014, the Commission deemed it prudent to utilize the
actual expenditure of PEMC for each cost item for CY 2013 as
reflected in the Variance Report it submitted, with due
consideration to any pertinent adjustment, such as inflation rates
and CPI, to come up with a circumspect analysis of the proposed
budget.
The budget components are hereby discussed in seriatim:
A. PERSONNEL SERVICES (PS)
PEMC's proposed budget for PS is PhP388,641,OOO.00

for its one hundred sixty (160) employees, including the
additional employees as a result of the reorganization duly
approved by its PEM Board and for the RCOA. Said
reorganization was recommended by SGV & Co. due to the
increasing workload of PEMC.
Page 14 of 35
The PS budget, which is based on the mid-point plus

adjustment on CPI, covers the annual salaries and other
benefits of PEMC's employees based on the compensation
package approved by its PEM Board. This includes other
benefits, such as overtime pay, 13th month pay, bonus,
retirement fund, uniform allowance, sick and vacation leaves
and other mandatory benefits like Social Security System
(SSS), Philippine Health Insurance (Philhealth) and Home
Development Mutual Fund (HDMF) contributions.
PEMC proposed an across-the-board increase of three

percent (3%) in PS from its previous year's proposed budget,
based on a projected increase in CPI for 2014 plus a three to
five percent (3%-5%) increase in accordance with its PEM
Board Circular No. 2007-003 issued on February 1, 2007, to
wit:
"b. 2) Across the Board Annual Increase
xxx all regular employees having at least

one year of tenure as of December 31st of
the previous year will be given an annual
across the board increase which shall take
effect every 1st of June of the year. The
across the board shall be based on inflation
rate (year to date consumer price index at
NCR) plus 3-5% maximum increase subject
to management discretion. "
In evaluating the proposed PS budget, the Commission

used the CY 2013 Variance Report adjusted by the projected
three percent (3%) CPI plus five percent (5%) maximum
increase in accordance with PEMC Board Resolution No. 2007-
03. The five percent (5%) increase is subject to the condition
that any unutilized budget on the PS or the MF as a whole shall
be reported to the Commission and will be deducted from the
MF of the following year.
The CY 2013 Variance Report discloses that the actual

expenditure for PS for CY 2013 was PhP330,317,OOO.00,
inclusive only of the budget for the additional employees hired
in July to December 2013 in the amount of PhP23,124,250.00.
Considering that the equivalent budget for additional employees
for the months of January to June 2013 was not included in the
Page 15 of 35
Variance Report, it shall be added to the approved budget for

CY 2014. The budget for the contractual personnel in Visayas
for the months of January to June 2013 shall be accordingly
deducted to the approved budget given that these contractual
personnel will be replaced by permanent personnel in Visayas.
Thus, the Commission approves the amount of
PhP380,450,736.00, adjusted by CPI of 3% plus 5J'o maximum
increase in accordance with PEMC Board Resolution No. 2007-
03 for PEMC's CY 2014 budget for PS.
B. MAINTENANCE AND OTHER OPERATING EXPENSES

(MOO E)
PEMC's proposed budget for MOOE is

PhP309,363,000.00, broken down as follows:
Budget Components In PhP

Honorarium 34,216,000.00
Rental 38,812,000.00
Utilities 32,828,000.00
Repairs and Maintenance 33,632,000.00
Contracted Services 32,505,000.00
Conference 9,709,000.00
Insurance 11,228,000.00
Participants Development Costs 5,000,000.00
Advertising and Promotions 6,902,000.00
Taxes and Dues 9,835,000.00
Travel and Transportation 15,701,000.00
Traininqs 9,965,000.00
Materials and Supplies 8,824,000.00
Subscriptions 6,023,000.00
Research and Development 6,066,000.00
Market Audit 48,117,000.00
Total MOOE 309,363,000.00
PEMC's proposed budget for the cost items Honorarium,

Utilities, Conference, Insurance, Advertising and Promotions, Taxes
and Duties, Trainings, Materials and Supplies and Subscriptions, was
based on the budget previously approved by the Commission or the
actual cost it incurred for CY 2012, adjusted by the projected CPI of
three percent (3%) for CY 2013, and further adjusted by the projected
CPI of three percent (3%) for CY 2014.
Page 16 of 35
On the other hand, for the other cost items Rental, Repairs and
Maintenance, Contracted Services and Market Audit, PEMC
proposed an increase of ten percent (10%) from its previous year's
approved budget since the contracts it entered into with the service
providers provide for an annual increase of ten percent (100/0)from
the previous rate.
In evaluating the proposed MOOE budget, the Commission

utilized the actual expenditure of PEMC for each cost item as
reflected in the CY 2013 Variance Report adjusted by a three percent
(3%) CPI.
1. HONORARIUM
PEMC proposed a budget of PhP34,216,000.00 for

Honorarium which represents the monthly allowances paid to
the members of its PEM Board and PEM Committees and Sub-
committees which were created to support the Board in its task
of governing the WESM. The five (5) PEM Committees are: 1)
Audit; 2) Market Surveillance; 3) Rules Change; 4) Technical;
and 5) Dispute Resolution. On the other hand, the five Sub-
committees are: 1) Market Operations; 2) System Operations;
3) Billing and Settlement; 4) Metering; and 5) Legal and
Regulatory Services.
The grant of Honorarium is in accordance with PEMC

Board Resolution No. 200-22, entitled "Grant of Honoraria for
Committee Members", dated September 27 2005 as amended
by Board Resolution Nos. 2007-16 dated April 27, 2007 and
2007-297 dated June 20, 2007. Considering that the amount
of Honorarium to be granted to each member is fixed pursuant
to the said resolutions and dependent on the additional
members for each Committee, the Commission approves the
amount of PhP28,065,250.00, subject to the submission of an
updated report on the filled-up members of the PEM Board and
its Committees.
2. RENTAL
PEMC proposed a budget of PhP38,812,000.00 for rental

expense, which accounts for the use of office and parking
Page 17 of 35
spaces, warehouse and lease of office equipment. Included

also in the budget is the cost of the new back-up site.
Accordingly, the Commission approves the amount of

PhP34,107,400.00, which is based on the actual expense as
shown in the CY 2013 Variance Report, adjusted by a ten
percent (100/0) increase as provided in the lease contracts
entered into by PEMC. Included in this approved amount is the
budget for the new back-up site for the months of July to
December 2014.
3. REPAIRS AND MAINTENANCE
The proposed budget of PhP33,632,000.00 includes

repairs and maintenance of other assets, such as PABX, Data
Management System, vehicle maintenance, air conditioning
unit cleaning, carpet cleaning, pest control, other maintenance
services and the annual renewal of its anti-virus software.
It also covers expenses for the annual maintenance and

technical support of the MMS and its other components based
on PEMC's existing contracts with regular suppliers, such as
ASS, HP and IBM.

PhP29,533,900.00 for this cost item, an adjustment of ten
percent (10%) increase from the actual expenditure for CY
2013 as reflected in the CY 2013 Variance Report.
4. CONTRACTED SERVICES
The budget for Contracted Services in the amount of

PhP32,505,000.00 covers consultancy/outsourced services,
such as external legal counsel, financial audit, Net Settlement
Surplus (NSS) audit, actuarial, tax consultancy, security and
janitorial services and other operation and management
consulting needs.
Page 18 of 35
The CY 2013 Variance Report discloses that PEMC's

actual expenditure exceeded the approved budget for this cost
item.
Recognizing the importance of this cost item to PEMC for

the effective discharge of its mandate, the Commission
approves the proposed amount of PhP32,505,OOO.00, subject
to the submission of the contracts it entered into with the
service providers.
5. MARKET AUDIT
The proposed Market Audit budget of PhP48,117,OOO.00

covers cost for the payment of professional fees for audit
services as required by the WESM Rules.
Under the said Rules, the PEM Board established the

PEM Audit Committee (PAC), which is mandated, on its own or
through appointment of external auditors, to conduct,
coordinate and supervise effective and independent audits of
the operations of the spot market and the Market Operator in
order to reinforce the trading participants' confidence in the
transparency and adequacy of the operation of the WESM.
This mandate is provided under Clause 1.5 of the WESM
Rules, which reads:
xxx
"The PEM Auditor shall:
a) Conduct annual audits of the Market

Operator and the settlement system and
any other procedures, persons, systems
or other matters relevant to the spot
market."
xxx
Further, Section 7.2.2 of the PEM Audit Market Manual

provides the general objectives of the annual audit of the spot
market, among which is to assess the procedures, working
processes and the appropriateness of the WESM settlement
system, data management and other systems used by the
Market Operator to administer the WESM.
Page 19 of 35
The Commission approves the budget for this cost item in

the amount of PhP37,653,000.00, which is based on the actual
cost as reflected in the CY 2013 Variance Report, adjusted by a
ten percent (10% increase as provided in the contracUs
entered into by PEMC with the audit provider. This budget will
ensure that market operations maintain a certain standard of
efficiency, effectivity and transparency, thereby, providing a
certain level of comfort to the market participants.
The approval of the budget for Market Audit is subject to

the submission of the contracts of PEMC with the selected audit
provider.
Relative thereto, PEMC must observe strict solicitation

process in the selection of an audit provider as the audit report
provides a reliable third-party information on the integrity,
accuracy and adequacy of WESM operations, procedures,
results and reports.
6. UTILITIES
Utilities expenses include payments for electricity, water

and communication or network services, such as leased lines
and telephone lines, used in the operation of WESM. The
proposed budget for this cost item is PhP32,828,OOO.00, which
is based on the approved budget for CY 2012, adjusted by CPI
for CYs 2013 and 2014.
The CY 2013 Variance Report discloses that the actual

expenditure for CY 2013 was only PhP26,180,OOO.00. Thus,
there is a variance of PhP6,648,OOO.00 from its proposed
amount of PhP38,045,OOO.00 in CY 2013.
Accordingly, the Commission approves only the amount

of PhP26,965,OOO.00, which is based on its actual expenditure
for CY 2013, adjusted by a three percent (30/0)CPI.
The approval of the budget for Utilities is subject to the

submission of the contracts of PEMC with the communication
lines provider.
Page 20 of 35
7. CONFERENCE
The proposed budget of PhP9,709,000.00 covers

expenses for the regular meetings of the PEMC Board, PEMC
Committees and meetings of PEMC personnel with the WESM
participants and other third parties. Such conferences serve as
a venue to discuss updates and issues about the market, which
include various participants' events held in Luzon and Visayas,
such as the Quarterly COP conferences, WESM anniversary
and WESM Annual Participants' Meeting.
Accordingly, the Commission approves the proposed

budget of PhP9,709,OOO.00since said venues ensure that the
market participants will be kept abreast with the developments
in the market.
8. ADVERTISING AND PROMOTIONS
PEMC proposed a budget of PhP6,902,000.00 for the

cost of newspaper and print ads as well as promotional exhibits
that will serve as an avenue to provide information and
understanding of the Philippine WESM. It also covers costs for
public relations, print and media advertisements and advertising
events, such as the exhibits participated by the energy industry
players which may be held locally or in foreign countries.
It should be noted that PEMC failed to submit documents

to justify the reasonableness of this cost item, thus, the
Commission is constrained to deny the proposed budget.
9. TRAVEL AND TRANSPORTATION
Travel and transportation include costs incurred for local

and foreign travels, particularly, airfare, per diem, lodging and
meal allowances. The proposed budget for foreign travels in
2014 is allotted for joining the annual EISG Conference, APEX
Global and Regional ASEAN Energy Business Forum and
official meetings with other energy markets.
., .
Page 21 of 35
The budget of PhP15,701,000.00 also covers the cost of

gasoline and oil of PEMC's service vehicles.

PhP14,438,540.00, which is based on the actual expenditure
for CY 2013 as shown in the CY 2013 Variance Report,
adjusted by three percent (3%) CPI.
10. TRAININGS
PEMC proposed a budget of PhP9,965,000.00 for the

annual training programs for its employees, which covers
courses for managerial, technical and other specialized skills.
With the new challenges in technology and the continuous
development in the WESM, the employees of PEMC must
sustain and enhance their expertise to be able to perform their
mandate.
The Commission recognizes the need to enhance the

skills and talent of PEMC's employees to ensure efficient and
effective operation of the market.

PhP5,017, 100.00, which is based on its actual expense for CY
2013 as shown in the CY 2013 Variance Report, adjusted by a
ten percent (100/0)increase.
11. SUBSCRIPTIONS
PEMC proposed a budget of PhP6,023,000.00 for this

cost item which includes newspaper publication of PEMC
applications submitted to the Commission or the DOE, such as
MF applications, revisions in the WESM Rules, PDM or NSS,
which require notice to the public. It also includes the costs of
annual subscription of newspaper for official use.
A perusal of the CY 2013 Variance Report shows that the

actual expense for this cost item for CY 2013 was only
PhP1,033,000.00. Thus, the Commission approves only the
Page 22 of 35
amount of PhP1,063,990.00, adjusted by three percent (3%

CPI.
Anent this item, PEMC should submit relevant documents

to apprise the Commission as to the actual expenditure of the
approved budget.
12. MATERIALS AND SUPPLIES
PEMC's proposed budget of PhP8,824,000.00 for

Materials and Supplies covers costs for the purchase of
materials, office supplies and small office equipment which are
regularly used in its daily business operations.
Recognizing the need for this cost item and considering

that the actual expenditure for CY 2013 is higher than the
proposed budget for CY 2014, the Commission approves the
amount of PhP8,824,OOO.00 as proposed.
13. INSURANCE
PEMC's proposed budget of PhP11,228,000.00 for

Insurance covers premium payments for PEMC's assets and
protection against risk or possible lawsuit, such as property
insurance and insurance coverage for its service vehicles,
travels and for the Directors and Officers' Liability and
Corporate Reimbursement Insurance.

PhP9,731,440.00, which is based on the actual expense of
PhP9,448,000.00 for CY 2013 as reflected in the CY 2013
Variance Report, adjusted by three percent (30/0)CPI.
14. TAXES AND DUES
PEMC's proposed budget of PhP9,835,OOO.00 for Taxes

and Dues covers expenses for the payment of local business
Page 23 of 35
taxes to the local government, association dues, registration

and membership fees.
Considering that this cost item is obligatory in nature, the

Commission approves the amount of PhP6,403,510.00, which
is based on the actual expenditure for CY 2013 as shown in the
CY 2013 Variance Report, adjusted by three percent (3%) CPI.
15. PARTICIPANT DEVELOPMENT
PEMC proposed a budget of PhP5,OOO,000.00 for its

information drive and public awareness programs for the
electricity consumers, WESM members and other external
parties. This budget covers costs of accommodation, venue
and meals for prospective participants and honoraria/fees for
external organizer/speakers.
The cost item Participant Development differs from the

cost item Conference in the sense that the former is intended
for annual and quarterly conferences held between and among
PEMC and WESM members while the latter covers activities,
such as WESM lecture series and WESM fundamentals for
WESM and non-WESM members. The Commission believes
that information drives and public awareness programs are
necessary to apprise the industry players and consumers
regarding the WESM and the electricity market, in general.
It should be noted that the approved budget of

PhP5,OOO,000.00 for the previous year as shown in the CY
2013 Variance Report was fully spent by PEMC.
Accordingly, the Commission approves a budget of

PhP5,OOO,OOO.00 for Participant Development, subject to
PEMC's submission of the programs and projects conducted at
the end of CY 2014, with corresponding breakdown of the costs
incurred for the said activities.
Page 24 of 35
16. RESEARCH AND DEVELOPMENT
PEMC proposed a budget of PhP6,066,000.00 for

Research and Development which is two percent (20/0) of the
total proposed budget for MOOE. This is in compliance with
the recommendation of its auditor in the previous year's market
operation audit to allocate this fund to support the
improvements in the market operations.
The Commission believes, however, that the other

projects of PEMC can sufficiently finance this cost item, like
Market Enhancement and Development Projects, which consist
of MRDP, inasmuch as the objectives of the said projects are
aligned or consistent with the objective of this cost item. Thus,
PEMC's proposed budget for this cost item is disallowed.
In summary, the Commission approves a total budget of

PhP249,017,530.00 for PEMC's MOOE for CY 2014, broken down as
follows:
PEMC's Commission-
Proposed Approved
Budget Budget Variance
Particulars (PhP) (PhP) (PhP)
Honorarium 34,216,000 28,065,250 6,150,750
Rental 38,812,000 34,107,400 4,704,600
Utilities 32,828,000 26,965,400 5,862,600
Repairs and Maintenance 33,632,000 29,533,900 4,098,100
Contracted Services 32,505,000 32,505,000 -
Conference 9,709,000 9,709,000 -
Insurance 11,228,000 9,731,440 1,496,560
Participants Development Cost 5,000,000 5,000,000 -
Advertising and Promotions 6,902,000 - 6,902,000
Taxes and Dues 9,835,000 6,403,510 3,431,490
Travel and Transportation 15,701,000 14,438,540 1,262,460
TraininQs 9,965,000 5,017,100 4,947,900
Materials and Supplies 8,824,000 8,824,000 -
Subscriptions 6,023,000 1,063,990 4,959,010
Research and Development 6,066,000 - 6,066,000
Market Audit 48,117,000 37,653,000 10,464,000
Total MOOE 309,363,000 249,017,530 49,881,470
Page 25 of 35
C. CAPITAL EXPENDITURES (CAPEX)
PEMC proposed a budget of PhP82,412,000.00 for CAPEX, to

wit:
Particulars PhP, Million

MMS Enhancement and U rade 48,831,000.00
EnhancementiRe lacement of E ment 17,963,000.00
Cor orate Infra 3,372,000.00
Lease 1m rovement 12,246,000.00
Total CAPEX 82,412,000.00
The aforesaid CAPEX covers. costs allocated for the

enhancement and upgrade of the Corporate Infrastructure, MMS
Equipment (hardware and software) and Lease Improvement.
Majority of the budget is allotted for MMS Enhancement and

Upgrade, which shall require additional man-hours from the vendors
to perform such activities. Said enhancements/upgrade emanated
from the operational requirements of the System Operator with regard
to the forthcoming Reserve Market and recommendations from
PEMC's Market Surveillance Committee (MSC) and management
initiatives to achieve efficient operation of the market. PEMC
explained that these proposals were intended to resolve issues
concerning MMS or provide contingency in case of unforeseen
problems in its current operations while the design, procurement,
development, testing and installation of the NMMS are underway.
The NMMS Project, which is a three (3) - year project, is expected to
be fully operational by the latter part of 2016 or early 2017 assuming
that the negotiations are complete or the contract has been awarded
by the end of the year.
These activities include:
a) Revision of the current MMS software's functionality to

allow limitation in the scheduling of the reserve provider to
strictly one reserve category. The costs proposed are for
man-hour estimates that will cover the vendor's (ASS)
design, coding, testing and project management. This is
Page 26 of 35
in . preparation for the implementation of the Reserve

Market;
b) Revision of the participant interface functionality in the

current MMS to achieve a more efficient assessment of
the trading participants' compliance with the relevant rules
on submission and cancellation of offers. The additional
man-hour estimates, also from ASS, shall be for
additional offer validation and enhancement to the
cancellation of offers;
c) Upgrade of the MMS Uninterruptible Power Supply

(UPS) to 80 kVA capacity to augment the existing UPS
capacity due to increase in additional computing
equipment and user computer terminals; and
d) Acquisition of an IT service management software (help

desk and technical support ticketing system) to automate
the day-to-day incident reporting, corrective repairs and
service request management in support of the MMS.
In view of the foregoing, the Commission deems it necessary to

approve the budget amounting to PhP48,831,OOO.00 for MMS
Enhancement and Upgrade to enable PEMC to operate and maintain
a reliable and efficient electricity market.
Corporate Infra pertains to acquisition of hardware and software

for the procurement and upgrade of corporate management system.
The enhancement/replacement of equipment includes the costs of
the hard disk drives, workstations and server computers which are
due for upgrades and replacements.
It should be noted that the Commission, in its Decisions

approving the CYs 2012 and 2013 MF Applications, has already
approved the budget for this cost item. Thus, the Commission finds it
prudent to maximize the service life of this equipment/hardware which
is, on the average, three (3) to five (5) years before considering its
replacement or procurement.
Accordingly, the Commission disapproves the proposed budget

for the cost items Enhancement/Replacement of Equipment and
Page 27 of 35
Corporate Infra amounting to PhP17,963,OOO.00 and

PhP3,372,OOO.00, respectively.
Meanwhile, the budget for Lease Improvement in the amount of

PhP12,246,OOO.00 pertains to the cost for the refurbishment of
additional office space in Luzon. PEMC explained that the
preparation, negotiation and refurbishment, pertinent to this cost item,
are on-going. The Commission believes that this cost item may be
approved in order for the projects to be implemented, subject to the
submission of the negotiated contract between PEMC and the service
provider and its supporting documents showing the details of work,
office area specifications and cost breakdown of the project.
Accordingly, the Commission approves a total amount of

PhP61,077,OOO.00 as PEMC's budget for CAPEX for CY 2014.
D. MARKET ENHANCEMENT PROJECTS
PEMC's proposed Market Enhancement Projects consist of the

MRDP and Forwards Market Projects, which are intended for
improving or enhancing the performance of its core functions. This
will also allow PEMC to evaluate and implement market rules and
regulatory changes.
The MRDP is a hardware and software testing and

development platform where market modeling, simulation, design and
development can be conducted without actually investing into a full
scale production set-up.
On the other hand, Forwards Market Project is a research and

development project with the primary objective of developing a
market design in support of the studies and directives of the DOE
regarding electricity derivatives.
Shown below is the proposed budget of PEMC for its MRDP

and Forwards Market Projects as prayed for in its various MF
Applications:
Page 28 of 35
Year 1 Year 2 Year 3

Projects CYs 2010-2011 CY 2012 Total
CY 2013
MF Application MF Application (In Million)
MF Application
MRDP 14,400,000.00 9,200,000.00 6,000,000.00 29,600,000.00
Forwards
Market 8,731,000.00
8,731,000.00 - -
The Commission, in its Decision approving the CYs 2010-2011

MF Application, has already granted an initial funding of
PhP4,626,000.00, equivalent to twenty percent (20%) of the
proposed Year 1 budget for the MRDP and Forwards Market
Projects. On the other hand, the budget for Years 2 and 3 was
granted in the Commission's Decisions approving the CYs 2012 and
2013 MF Applications dated December 3, 2012 and July 8, 2013,
respectively.
PEMC asserted that it cannot completely implement both

projects unless full funding is granted. Thus, it prayed that the
remaining eighty percent (80 ) of the proposed Year 1 budget in the
%
amount of PhP18,505,000.00 be approved in the instant application,

as shown below:
Projects Year 1 Year 1 Required

Proposed Approved Additional
Budget Budget Funding
MRDP 14,400,000.00 2,880,000.00 11,520,000.00
Forwards
Market 8,731,000.00 1,746,000.00 6,985,000.00
Total 23,131,000.00 4,626,000.00 18,505,000.00
PEMC explained that with the implementation of the MRDP

Project, it can study and simulate proposed changes to the current
market design, such as: 1) day-ahead market; 2) reduction of trading
interval; 3) integration of the Mindanao Grid into the WESM; 4)
enhancements to the EMS-MMS data exchange; 5) changing values
and priorities of Constraint Violation Coefficients (CVCs); and 6)
shorter gate closure. The software/hardware of this project will be
independent from the MMS and corporate network and
communication system. With the aforesaid simulations, PEMC may
be able to identify potential problems and study the impact of the
Page 29 of 35
proposed changes in the market before it can be fully implemented,

thus, preventive measures can be addressed immediately.
On the other hand, PEMC explained that the Forwards Market

Project is merely for research and development study, the output of
which is not a commercially operational Forwards Market. It has
proposed a Forwards Market in the form of an Over-the-Counter
Bulletin Board (OTCB) Facility to facilitate the development of the
auctioning and trading of electricity forward contracts.
Shown below are the components of the Forwards Market

Project cost:
550,000.00
2,940,000.00
1,139,000.00
8,731,000.00
1,746,000.00
6,985,000.00
The project activities involve, among others, research and

development activities to gain full understanding of the conceptual
design of Forwards Market and its mechanism and engagement of a
consultant. Said consultant will be commissioned to prepare the
market design document and draft framework for market rules and
necessary manuals. In addition, the said consultant will also be
tasked to draft the necessary amendments to existing market rules to
provide for the establishment of Forwards Market upon consultation
with industry participants.
PEMC acknowledged during the August 22, 2013 hearing of

this case that the implementation of the said project depends on the
result of the study of the consultant on whether or not Forwards
Market may be applied to the current market given the current WESM
operations or market design. Aside from the study and drafting of
rules, the consultant should also recommend appropriate actions for
the establishment of this kind of market. Should the Forwards
Page 30 of 35
Market Project be deemed not feasible by the consultant, then, it will

not be considered for implementation.
Given this scenario, the Commission believes that the full cost
of this project is not commensurate to its expected output since the
proposed subsequent activities will depend on the applicability of the
project based on the resulting outcome of the consultant's study.
In this regard, the Commission deems it reasonable to approve

only another twenty percent (20%) of the Year 1 budget in the
amount of PhP4,626,000.00. The Commission believes that since the
approved budget for Years 2 and 3 have not yet been spent and
therefore, remains intact, the total amount of PhP19,826,000.00 may
be used and is sufficient to fund any scheduled project for Year 1.
The approval of the entire eighty percent (80%) of the Year 1

budget is unwarranted under the circumstances considering that up
to date, PEMC has not submitted any supporting document to
substantiate the alleged need for the full funding of the said projects.
Thus, with the approved budget for Years 1, 2 and 3
(PhP19,826,000.00), plus the herein approved twenty percent (20%)
or PhP4,626,000,OO or a total amount of PhP24,452,000.00, PEMC
may now commence with not only initial works, such as hiring
software programmers to create software codes, purchase computer
servers, terminals or software development tools and equipment, but
also other projects to fully utilize the budget which is readily available
to it.

PhP4,626,000.00 for the MRDP and Forwards Market Project.
PEMC is hereby authorized to utilize the approved budget for Years
1, 2 and 3 and start implementing the scheduled projects for Year 1.
With regard to the carrying charges that accrued from the time
the Commission approved the budget for MRDP and Forwards
Market in the CYs 2010-2011 MF Application until the approval of the
CY 2013 MF Application, the Commission deems it appropriate to
deduct the said carrying charges from the herein approved budget for
the MRDP and Forwards Market Projects it appearing that the funds,
although collected, have not been utilized.
Page 31 of 35
In this note, the Commission deems it prudent and reasonable

to utilize the ninety-one (91) day T-bill rates plus 300 points for every
month from January 2012 to September 2014, equivalent to
PhP1,313,689.80. This is consistent with the Generation Rate
Adjustment Mechanism (GRAM) wherein carrying charges are
imposed for every month of delay in the implementation of the new
generation rates, equivalent to 91- day T-bill rates plus 300 points.
Accordingly, the Commission approves the total amount of

PhP3,312,310.20 intended for the remaining Year 1 budget of the
MRDP and Forwards Market Projects, computed as follows:
4,626,000.00
1,313,689.80
3,312,310.20
E. PROVISION FOR THE DOE AND ERC MONITORING

FACiliTIES
This represents the budget, pegged at two percent (20/0)of the

MF, to support the monitoring functions/facilities of the Commission
and the DOE pursuant to CY 2007 MTF Decision dated January 30,
2008, which reads:
xxx
"Recognizing the need to continually support the

monitoring functions of the Commission and the
Department of Energy (DOE), PEMC is hereby
directed to set aside two percent (2%) of its total
annual MTF for the Commission's and DOE's
monitoring facilities."
xxx
Page 32 of 35
Given the approved budgetary requirement for PS, MODE,

CAPEX, Market Enhancement Projects, the consequent amount to be
set aside for the ERC and DOE monitoring facilities is
PhP13,877,152.00.
II. UNUTILIZED MARKET TRANSACTION FEES IN CY 2013
The CY 2013 Variance Report discloses that there was an

unutilized MF in the amount of PhP4,750,000.00 out of PEMC's
approved budget for CY 2013.
Pursuant to the Commission's Decision dated January 30, 2008

in ERC Case No. 2007 -124 RC, any over-recovery or excess in the
MF of the previous year shall be refunded to the customers and
deducted from the total budget approved for the succeeding year.
Thus, the herein approved MF for CY 2014 shall be reduced by the
unutilized MF for CY 2013, computed as follows:
A roved MF for CY 2014 707,734,728.00

Unutilized MF for CY 2013 (4,750,000.00)
Total PhP 702,984,728.00
WHEREFORE, the foregoing premises considered, the

application filed by the Philippine Electricity Market Corporation
(PEMC) for approval of the level of Market Transaction Fees (MTF)
for calendar year (CY) 2014 for the Philippine Wholesale Electricity
Spot Market (WESM) is hereby APPROVED with MODIFICATION,
subject to the following conditions:
1. PEMC is granted the budgetary requirements for CY 2014

in the amount of Seven Hundred Two Million Nine
Hundred Eighty-Four Thousand Seven Hundred
Twenty-Eight Pesos (PhP702,984,728.00), broken down
as follows:
Page 33 of 35
Commission-
Approved Budget
PhP
380,450,736.00
249,017,530.00
61,077,000.00
3,312,310.00
13,877,152.00
707,734,728.00
Unutilized MF for CY 2013 4,750,000.00
Total Approved MF for CY 2014 702,984,728.00
2. PEMC is directed to submit the following documents,

within thirty (30) days from receipt hereof:
a. Contracts entered into with the service providers

under the cost items Contracted Services, Market
Audit and Repairs and Maintenance;
b. List of programs and projects undertaken at the end

of CY 2014, with corresponding breakdown of costs
for the awareness activities under the cost item
Participant Development;
c. Status of projects and other supporting documents,

including requests for proposals and the proposals
made by the consultants, with corresponding
breakdown of costs for the MRDP and Forwards
Market Projects; and
Page 34 of 35
d. Contracts entered into with the service providers

under the cost items Lease Improvement and MMS
Enhancement and Upgrade, with supporting
documents showing details of work and cost
breakdown of the projects.
SO ORDERED.
Pasig City, October 15,2014.
tb .Ar~
NAIDA G. CRUZ-DUCUT
Chairperson
ALFR DO% G~!{ff~1 fJ!YAP-TARUC

Commissioner commi12~ner
. MAGPALE-ASIRIT
Page 35 of 35
Copy Furnished:
1. Attys. Criselda S. Martin-Funelas and Gladys Evette G. Nebab

Counsel for Philippine Electricity Market Corporation (PEMC)
18th Floor, Robinsons-Equitable Tower
ADB Avenue corner Poveda Street, Pasig City
2. Office of the Solicitor General (OSG)

134 Amorsolo Street, Legaspi Village,
City of Makati 1229
3. Commission on Audit (COA)

Commonwealth Avenue,
Quezon City 1121
4. Senate Committee on Energy

GSIS Building, Roxas Boulevard,
Pasay City 1300
5. House of Representatives Committee on Energy

Batasan Hills, Quezon City 1126
6. The Office of the City Mayor

Pasig City
7. President
Philippine Chamber of Commerce and Industry (PCCI)
3rd Floor, ECC Building,
355 Gil Puyat Ave., Makati City
8. Manila Electric Company (MERALCO)

Ortigas Avenue, Barangay Ugong, Pasig City
9. Engr. Robert F. Mallillin

151 EDSA, Brgy. Wack-Wack, Mandaluyong City

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Republic of the Philippines

ENERGY REGULATORY COMMISSIO

IN THE MATTER OF THE

ERe CASE NO. 2013-137 RC

Before the Commission for resolution is the application filed on

In the said application, PEMC alleged, among others, the

1. It is a non-stock, non-profit corporation duly organized

2. The instant application is filed pursuant to Section 30 of

"The cost of administering and

3. The instant application is filed within the period provided

PROPOSED LEVEL OF MARKET FEES

4. The MTF applied for is Eight Hundred Fourteen Million

a. Its budgetary requirements for CY 2014 in the

b. Eighty percent (800/0) of the Year 1 budget for the

2 Docketed as ERC Case No. 2007-124 RC

Budgetary Requirements for CY 2014

5. Its budgetary requirements for CY 2014 consist of the

Bud et Com onents Amount

5. The PS pertains to the salaries and benefits of one

6. The MODE includes, among others, honorarium, rent,

7. The CAPEX consists of enhancements and upgrades to

8. The Provision for the DOE/ERC Monitoring Facilities

9. The Market Development Projects cover: a) the services

10. In preparing its budgetary requirements, it adjusted its

11. A discussion of the specific budgetary allocations falling

Remainder (80%) of the Year 1 Budget for the Forwards

12. The Forwards Market Project is a research and

13. The MRDP Project aims to establish a hardware and

15. In its Decision in its CYs 2010-2011 MTF application, the

16. However, the approval of the entire project cost is

6 Docketed as ERC Case No. 2010-079 RC

7 Docketed as ERC Case No. 2012-084 RC

17. The amounts proposed are net of applicable taxes, such

18. The following are not included in the instant application:

a) The Provisions for the Repayment of the MMS Loan

b) New MMS (NMMS) Project - It filed on September

19. The MMS Loan and NMMS applications are pending

20. The MTF shall be apportioned among generators where

Total Annual Market Transaction Fee/12

21. Should the Commission approve its application for the

9 Docketed as ERC Case No. 2012-097 RC

10 Docketed as ERC Case No. 2011-127 RC

11 Docketed as ERC Case No. 2007-004 RC

Total Annual Market Transaction Fee/12

22. Based on initial indicative figures, the estimated MTF

23. The indicative MTF rate is based on the Luzon and

24. The prevailing market fee rate or MTF level approved by

Having found said application sufficient in form and in

In the same Order, PEMC was directed to cause the publication

The Office of the Solicitor General (OSG), the Commission on

Likewise, the Office of the Mayor of Pasig City was furnished

On August 1, 2013, Manila Electric Company (MERALCO) filed

On August 15, 2013, PEMC and MERALCO filed their

On August 16, 2013, Engr. Robert F. Mallillin filed his "Motion to

In the said hearing, PEMC presented its proofs of compliance

Subsequently, PEMC moved for a declaration of general

In the said hearing, PEMC conducted an expository

PEMC interposed an objection with respect to Engr. Mallillin's

Subsequently, a pre-trial conference was conducted among the

The pre-trial conference having been terminated, PEMC

Thereafter, MERALCO conducted its cross-examination of the

Upon termination of the cross-examination, the Commission

MERALCO and Engr. Mallillin manifested that they would not