Whereas, Section 30 of Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of 2001” or EPIRA mandates the Department of Energy to establish the wholesale electricity spot market (WESM);

Whereas, under the aforestated provision, the WESM shall be implemented by the market operator which shall be under the administrative supervision of TRANSCO until the market operator’s function, assets and liabilities is transferred to the duly qualified Independent Market Operator (IMO);

Whereas, pursuant to R.A No. 9136, a Memorandum of Agreement (MOA) dated July 9, 2001 was entered into between DOE Secretary Vincent S. Perez and National Power Corporation (NPC) President Jesus N. Alcordo whereby it was agreed that NPC shall provide the appropriate funding, resources and personnel necessary to develop the WESM rules and to set up the infrastructure including the software and hardware for the establishment, implementation and operation of the WESM;

Whereas, in accordance with the MOA, the Market Operations was created as a functional unit (MO Unit) responsible in assisting the DOE in the preparatory work for the initial operation of the WESM;

Whereas, after the incorporation of TRANSCO, NPC transferred the MO Unit to Transco (TRANSCO-MO);

Whereas, to expedite the coordination between the DOE and TRANSCO-MO, Board Resolution No. TC 2002-48 was passed by the Transco Board, detailing the personnel of the TRANSCO-MO to the DOE: NOW, THEREFORE, in view of the forgoing, it is hereby approved that:

1. The TRANSCO-MO is hereby designated as the Market Operator authorized to actually operate the WESM, under the direction of the DOE, until substituted by the Independent Market Operator (IMO) in accordance with the EPIRA.

2. The TRANSCO-MO, under the direction of the DOE, shall prepare the necessary procedures and documentation required under the WESM Rules, including the WESM Price Determination Methodology and the Market Fees structure and shall serve as the agent of the DOE in the filing of petition to the Energy Regulatory Commission for approval.

3. The TRANSCO-MO, under the supervision of the DOE, shall prepare the groundwork leading to the installation and commissioning of the Market Management System (MMS) that is necessary to operate the WESM.

4. The TRANSCO-MO shall submit to the DOE an overall work plan leading to the timely and appropriate establishment of WESM and monthly activity report for monitoring purpose.

5. The TRANSCO-MO, under the direction of the DOE, shall be responsible for the operation of the demonstration market for WESM.

6. The TRANSCO-MO shall coordinate with the entity to be constituted by the DOE composed of industry participants that will eventually govern the WESM. The TRANSCO-MO shall execute such documents as may be required to properly operate the WESM.

The designation of the TRANSCO-MO as the MO pursuant to law and the WESM Rules shall continue, as such, until the functions, assets and liabilities of the Market Operator are transferred to and IMO pursuant to the joint endorsement of DOE and electric power industry participants under the EPIRA; This Department Order shall take effect immediately. Fort Bonifacio, Taguig, Metro Manila, June 9, 2003. (Sgd.) VINCENT S. PEREZ, Jr. Secretary

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