| Wed, 21 Oct 2020

FAQs

Market Governance
Frequently Asked Questions on WESM Dispute Resolution
  1. Why is Arbitration the preferred mode (i.e., over litigation and quasi-judicial adjudication) of dispute resolution in the WESM?
  2. What makes WESM Arbitration special?
  3. What are the ADR methods/mechanisms available in the WESM?
  4. Who may use WESM ADR?
  5. What are the subject matter/issues that may be submitted for resolution under the WESM Dispute Resolution process?
  6. Can a party still seek non-monetary claims given that WESM disputes are civil, commercial or business in nature?
  7. Can a party dispense filing its case to the WESM Dispute Resolution process?
  8. How long does it take before Negotiation/Mediation/Arbitration proceedings are completed?
  9. What recourse does an industry participant have through which to settle its disputes? What is the role WESM Dispute Resolution within the larger context of dispute resolution mechanisms in the electricity industry?
  10. Do parties have to go through each ADR method?
  11. What is Dispute Management Protocol (DMP)?
  12. How can a party/ies be assured of the enforceability of a compromise agreement (mediation) or an arbitral award (arbitration)?
  13. Can the Arbitral Tribunal enforce the award it rendered?
  14. Can the Arbitral Tribunal decide on whether or not a party may pass-on to its consumers its financial obligations that stemmed from an award?
  15. Who shall shoulder the costs for mediation or arbitration proceedings?
  16. Where can I find the required forms to initiate Negotiation/Mediation/Arbitration?
  17. Where does a party file the required forms for Negotiation/Mediation/Arbitration?

 

1. Why is Arbitration the preferred mode (i.e., over litigation and quasi-judicial adjudication) of dispute resolution in the WESM?

By provision of the EPIRA Law, the WESM was established to be initially autonomous and eventually independent, with the Department of Energy (DOE) simply maintaining policy oversight, and the Energy Regulatory Commission (ERC) maintaining regulatory oversight, over it. Consistent with the principles of autonomy and independence is the establishment of a dispute resolution framework in the manner of agreement-based arbitration, which allows its members ample flexibility to settle their own issues between or among themselves. Arbitration as a mode of settling disputes, rather than adjudication, is considered to be more apt for a closed-circuit, self-governing system such as the WESM.

 

2. What makes WESM Arbitration special?

Two aspects set WESM Arbitration somewhat differently from the usual:

  1. There is no contract (like those for BCQ or Bilateral Contract Quantities) between/among the disputants.

    Before the immediately preceding statement misleads the reader, because it is not really accurate to say that there is "no contract" between/among the WESM Participants, an explanation/qualification as to how WESM works needs to be given. To start with: the generated electricity is gross-pooled in the WESM, that is, a generator supplies power to the Grid without knowing beforehand the details of any of the 3 essential elements of contract, as follows: (1) SUBJECT: the identity of the counter-party/ies (i.e., which distributor(s) or bulk user(s) would be taking electricity from any node in the Grid or whose generated power is one taking); (2) OBJECT: the quantity of electricity, since electricity is traded at hourly trading intervals in real time; and (3) CONSIDERATION: the price/KWHr, since their prices are bidded hourly in real time. Considering the said qualification, it would be impossible for the parties to draw up a contract beforehand.

    Fortunately, the WESM Rules, to which the WESM Participants have bound themselves to, contain the above-said 3 elements of contract -- the mechanics of determining the identity of the supplier(s) and user(s), the quantity/ies and the price(s). Thus, it serves as a multilateral contract/agreement. The WESM Rules also define the legal relationship among WESM Participants, specifying their rights and obligations.

    The same WESM Rules, which constitute the contract/agreement among the WESM Members/Participants, contains an arbitration agreement under Clause 7.3.1.1 stipulating that "[] the parties shall bind themselves with the effect of submitting any dispute, controversy or claim arising out of or relating to, a WESM transaction to which they are or will be a party for settlement by arbitration in accordance with the dispute resolution provisions provided [in the WESM Rules]."
  2. The WESM is a closed-circuit, mandatory, self-governing market.

    Although the ERC is mandated by the EPIRA law to enforce the rules and regulations of the electricity spot market and provide regulatory oversight, the WESM itself has mechanisms in place to ensure that the provisions of the WESM Rules and Market Manuals are implemented and breaches against the same are properly and fairly enforced.

    Once one registers to become a WESM Member, and agrees/undertakes to be bound by the WESM Rules and Market Manuals, etc., it is essentially opting-in to the arbitration agreement contained in said Rules/Manuals. In particular, this includes agreeing to submit its WESM-related disputes in accordance with the WESM dispute resolution framework/process, which includes arbitration, and to be bound by the resulting arbitral decisions/award.

3. What are the ADR methods/mechanisms available in the WESM?

ADR or the ADR System, as defined in Republic Act No. 9285 or the ADR Act of 2004, refers to "any process of procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency...in which a neutral third party participates to assist in the resolution of issues, which included arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any combination thereof."

Per Clause 1.2.2 (e) of the WESM Rules, it is the intent of the WESM to "provide a cost-effective framework for resolution of disputes among WESM Participants, and between WESM Participants and the Market Operator..."

The ADR mechanisms provided in the WESM are Negotiation, Mediation and Arbitration.

An overview and flowcharts of each ADR method can be read here: Dispute Resolution Process

4. Who may use WESM ADR?

Pursuant to Clause 7.3.1.1 of the WESM Rules, the Dispute Resolution process of the WESM may be used to resolve disputes relating to or in connection with transactions in the market that may arise between or among the following parties:

  • Market Operator
  • System Operator
  • PEM Board and its Working Groups (i.e., WESM Governance Committees) except the Dispute Resolution Administrator
  • WESM Members
  • Intending WESM Members

5. What are the subject matter/issues that may be submitted for resolution under the WESM Dispute Resolution process?

As a general rule, WESM disputes center on issues or conflicts that are inter-partes (between the parties) and that arose out of or over WESM transactions (i.e., civil, commercial/business in nature). These issues may be settled under the WESM dispute resolution process.

It should be emphasized that WESM disputes are distinct from those related to or arising from violations or breaches of Market rules and policies and anti-competitive behaviors as they are considered administrative or regulatory in nature. These issues are not cognizable under the WESM dispute resolution process and are under the auspices of (which may be delegated/ deputized by) the ERC.

Below are examples of specific subject matters considered to be arbitrable under the WESM Dispute Resolution Process:

  1. Disputes over final settlement statements (Clauses 3.14.8.2, 3.14.8.3 and 7.3.6 of WESM Rules; Sections 2.5.1.2 and 2.8 of the Billing and Settlement Manual)
  2. Disputes arising from the application of the Metering Service Agreement (Section 9.1 under Article 9 in the Appendix of the Metering Standards and Procedure Manual)
  3. Disputes over determination of additional compensation to a Trading Participants (Section 4.2.3.5 of the Administered Price Determination Methodology Manual)
  4. Disputes arising from the application of the Market Network Model (Section 5.9.1 of the Market Network Model Development and Maintenance – Criteria and Procedures Manual)
  5. Disputes over the Market Operator's disapproval of request by a Trading Participant to effect change in its representation in the Market Network Model (Section 3.3.3 of the Registration, Suspension and De-registration Criteria and Procedures Manual)
  6. Disputes between the System Operator and Ancillary Services Provider over the determination of payment for spot market ancillary services (Clause 3.3.3.7 of the WESM Rules)
  7. Any dispute under or in relation to a contract between two or more persons or entities where the contract provides that the dispute resolution procedures under the WESM Rules are to apply to any dispute under or in relation to that contract with respect to the application of the WESM Rules (Section 3.1 (f) of the WESM Rules)

Section 3.1.1 of the Dispute Resolution Market Manual further details the subject matters of disputes where the WESM dispute resolution process applies.

6. Can a party still seek non-monetary claims given that WESM disputes are civil, commercial or business in nature?

Yes. Section 3.1.1 (d) of the Dispute Resolution Market Manual states that the “...the provisions and procedures in this [Dispute Resolution] Manual shall apply... [f]or disputes arising under or in connection with or in relation to... [a]ny act, omission or behavior by any of the parties mentioned above [MO, SO, WESM Members, Intending WESM Members] in a manner inconsistent with the WESM Rules....". Pursuant to the subject provision, a claimant may seek a non-monetary or non-pecuniary award prohibiting another party from performing or not performing a particular act if such behavior is seen to have a negative impact on the claimant's business.

7. Can a party dispense filing its case to the WESM Dispute Resolution process?

No. Once one has become a WESM Member, it agrees to bind itself to the provisions of the WESM Rules, among them is Clause 7.3.1.1, which effectively serves as an arbitration agreement at-large. Under said provision, WESM Participants are obliged to settle their disputes arising out of WESM transactions to the WESM dispute resolution process in accordance with applicable procedures in the Dispute Resolution Market Manual.

Further, per the Special Rules of Court on ADR of the Supreme Court, a dispute filed before the courts shall be dismissed and the parties be referred to arbitration pursuant to Republic Act 9285 and their arbitration agreement.

8. How long does it take before Negotiation/Mediation/Arbitration proceedings are completed?

For Negotiation, the parties have forty-five (45) business days from the receipt of the Notice of Dispute to resolve their dispute between or among themselves. The parties may agree in writing to extend this 45-business day period.

For Mediation, the parties shall have ten (10) business days after the mediator has been selected to complete the mediation proceedings, unless the time is extended by mutual agreement.

For Arbitration, the Arbitral Tribunal must render its final award within six (6) months from the date when the Terms of Reference (TOR) of the case is either signed by both the Arbitral Tribunal and the parties or has been approved by the DRA, whichever is applicable.

9. What recourse does an industry participant have through which to settle its disputes? What is the role WESM Dispute Resolution within the larger context of dispute resolution mechanisms in the electricity industry?

Participants or players in the power industry are afforded various avenues to settle their disputes. The nature of a dispute's subject matter determines which appropriate body a party should lodge its case.

The WESM Dispute Resolution process is particularly catered for those industry participants who are members of the WESM or who partake in a WESM transaction. Should a WESM Member/Participant finds itself having a dispute with a subject matter that is not considered cognizable under WESM Dispute Resolution, it could file its case before the DOE or the ERC, whichever is applicable.

 

DEPARTMENT OF ENERGY* ENERGY REGULATORY COMMISSION** WESM***

1) For disputes related to the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, marketing and distributing energy resources; and

2) For disputes related to the direct supply or connection of electricity./p>

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*Mactan Electric Company, Inc. vs. National Power Corporation, et.al (G.R. No. 172960, March 2010):

"The subject matter of the dispute between the parties is neither cross-ownership, nor abuse of market power, nor cartelization, nor anti-competitive or discriminatory behavior. Based on the allegations of MECO in its complaint and the essence of the relief it sought, the subject matter of its dispute with MCIAA, NPC and TRANSCO involved the distribution of energy resource, specifically the direct supply of electricity by NPC through TRANSCO to MCIAA, without passing through the distribution system of MECO as the franchise holder in the area. Therefore, their dispute was not within the authority of ERC to resolve.

But neither did the RTC have jurisdiction over the dispute. That power belonged to the Department of Energy (DOE)."

1) For all cases contesting rates, fees, fines and penalties imposed by ERC in the exercise of its powers, functions and responsibilities;

2) For disputes arising out of violations of regulatory policies, including, but not limited to:

a. Abuse of market power/ position;
b. Cartelization;
c. Anti-Competitive or discriminatory behaviors;
d. Price fixing/manipulation;
e. Economic & physical withholding,
f. Cross-ownership, etc.


3) For all cases involving disputes between and among participants or players in the energy sector.br />


--------------------------
**Section 43 of R.A. 9136:
"(l) Monitor and take remedial measures to penalize abuse of market power, cartelization, and anti-competitive or discriminatory behavior by any electric power industry participant.

xxx

(v) The ERC shall have the original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned powers, functions and responsibilities and over all cases involving disputes between and among participants or players in the energy sector."

 

 

1) For disputes between WESM Members or between participants in a WESM transaction; and

2) For disputes between participants in the Retail Market.

------------------------
*** (1) Section 3.1 of the Dispute Resolution Market Manual and (2) Clause 1.7 of the Retail Rules

In addition, the WESM Rules and applicable Market Manuals provide WESM Members/Participants recourse through which issues or complaints that do not necessarily raise a WESM dispute may be resolved or corrected. These include, but are not limited to, the following:

  • Submission of a notice of inquiry or disagreement related to the contents of a Preliminary Statement (refer to the Billing and Settlement Manual).
  • Submission of a Request for Investigation of possible non-compliance of another WESM Member (refer to the Market Surveillance, Compliance and Enforcement Manual).
  • Submission of a proposed amendment to the WESM Rules and Market Manuals, as the case may be, to the Rules Change Committee (refer to the Manual of Procedures for Changes to the WESM Rules).

10. Do parties have to go through each ADR method?

It is encouraged that parties amicably settle their disputes between or among themselves first through negotiation, without the involvement of a neutral third party. If negotiations fail, the parties may agree to file their dispute to the DRA for mediation, provided that the DRA determines that the issue raises a WESM dispute. Should mediation efforts fail, Claimant(s) may submit the case for arbitration. However, pursuant to Section 7.3.1 (d) of the DRMM, "[s]hould the parties decide to dispense with mediation and proceed to arbitration directly, the parties may elect to do so subject to the issuance by the DRA of a certification stating that mediation is no longer a viable option for the parties."

11. What is Dispute Management Protocol (DMP)?

The Dispute Management Protocol is a procedure to be followed by all Market Participants in initiating resolution of disputes through Negotiation, prior to referring a dispute to the DRA either for mediation or arbitration. The goal of the DMP is to facilitate and allow the parties to negotiate through designated DMP Focal Persons.
Annex A, Section 2 of the Dispute Resolution Market Manual elaborates the considerations in identifying the DMP Focal Persons.
The DRA posts the list of DMP Focal Persons and their respective contact details in the Market Information Website. More information about the qualifications and how to access the current list of DMP Focal Persons can be accessed through this link:
Dispute Management Protocol Focal Persons

12. How can a party/ies be assured of the enforceability of a compromise agreement (mediation) or an arbitral award (arbitration)?

The enforcement of a compromise/settlement agreement reached during mediation is governed by Sec. 17 of Republic Act No. 9285 (ADR Act of 2004). The Act provides that the parties have two options: (a) any of the parties may file a petition to the appropriate Regional Trial Court for the agreement to be executed, in which case, the court shall proceed to summarily hear the petition, and (b) the parties may agree to have the agreement be treated as or converted to an arbitral award, which shall be subject to enforcement under Republic Act No. 876 (Arbitration Law).
The enforcement of an arbitral award is governed by Sec. 23 of R.A. 876, which provides that a party may apply to the court having jurisdiction for an order confirming the award. A domestic arbitral award, per Sec. 40 of R.A. 9285, once confirmed shall be enforced in the same manner as final and executory decisions of the Regional Trial Court.
Further, failure to comply with the agreements reached during mediation proceedings and the decision of the Arbitral Tribunal in the award will be considered a breach of the Market Rules.

As participants in a mature Market, it is expected that the parties involved in a dispute voluntarily comply with the arbitral award. A recalcitrant party should be warned of the possibility of paying more than the original award, by way of interests incurred over the time it has not been paying, as well as the costs of or damages to the other party for having to go through another process of compelling it to so pay.

13. Can the Arbitral Tribunal enforce the award it rendered?

No. The enforcement of an arbitral award is altogether a different phase separate from the rendering of the award by the Arbitral Tribunal. By the principle of functus officio, the tribunal automatically ceases to exist, along with its powers, the moment it issues an arbitral award. The dissolution of the tribunal results in it no longer having the authority to act further on the matter, such as enforcing the award. Neither can the individual arbitrators act in one way or another unless they be or remain constituted as an Arbitral Tribunal.

If a party finds that it needs judicial enforcement of an award, it will have to file a motion to the Regional Trial Court to confirm said award, in which case, it shall have the same force and effect as a court judgement or order.

14. Can the Arbitral Tribunal decide on whether or not a party may pass-on to its consumers its financial obligations that stemmed from an award?

No. The issue of whether or not a party may pass on to the consumers its liabilities resulting from an arbitral award, regardless of its nature (e.g., penalties, liquidated damages, real costs of service, etc.), is no longer within the province of agreement-based arbitration, but within the sole authority of the ERC as part of its rate-fixing powers. How much or which portion of the liabilities can be passed-on, if at all, is also for the ERC to decide. The Arbitral Tribunal will have nothing to do with tariff-setting as the same is under the exclusive and non-delegable jurisdiction of the ERC per the EPIRA.

15. Who shall shoulder the costs for mediation or arbitration proceedings?

The parties shall bear the administrative costs of mediation and arbitration proceedings and the professional fees of the mediator and arbitrators. However, in both modes of dispute resolution, the Claimant will have to provide an advance on the costs of the proceedings to initiate the process.
In mediation, where the parties essentially volunteer to participate, the parties equally share the costs of the proceedings. But in arbitration, the sharing of the costs between the Claimant(s) and Respondent(s) will be determined by the Arbitral Tribunal in the final award, where the Claimant, if the Tribunal deems appropriate, may be reimbursed of all or part of the advance it provided.

16. Where can I find the required forms to initiate Negotiation/ Mediation / Arbitration?

Fillable forms for Negotiation, Mediation and Arbitration can be accessed from this link:
Dispute Resolution Handbook, Forms and Flowcharts

17. Where does a party file the required forms for Negotiation/Mediation/Arbitration?

All dispute resolution documents must be submitted or copy-furnished, as applicable, to the following address:

Dispute Resolution Administrator
c/o DRA Secretariat - Legal Department
18F Robinsons Equitable Tower
ADB Ave., Ortigas Center
Pasig City 1600
E-mail: legal@wesm.ph

 

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