The country’s steward of a bright future

OVER THE COURSE of 11 years, the count ry ’ s sole wholesa le electricity spot market ( WESM) has fostered transparency and competition in the electric power industry. The Philippine Electricity Market Corporat ion ( PEMC), the market operator, has made notable improvements in its market operations and observed good governance and corporate excellence. It has remained strong and reliable amidst the various challenges and changes in the industry, radiating a brighter future for Filipinos.

“The WESM has been an aid to the economic growth of the country and developments in the electric power industry. More than the competition, supply augmentation, investment simulation, and advancements that the WESM has contributed in nationbuilding, the WESM boasts years of integrity through transparency,” PEMC President Melinda L. Ocampo was quoted as saying in the WESM 2016-2017 annual report.

The WESM is an efficient venue for the trading of electricity, ensuring that electric power generation is balanced with the ever- changing demand for electricity. It serves as a clearing house or an intermediary between buyers and sellers that provides the current economic value of electricity in a particular period. Unlike other markets, WESM uses power pool where all electricity output from generators are centrally coordinated. Through this process, generators as well as bulk electricity buyers compete in the share of the pool, leading to eff iciency gains.

More competitive prices and increased customer sourcing have developed in recent years as electricity businesses have been pressured to reduce their energy costs, align prices and tariff s with costs and use assets more efficiently. It has also ended the inherently inefficient monopoly system of trading in electricity, providing consumers with the “choice of power” and the “power of choice.”

Offer price cap was lowered from P62,000/ MWh (megawatt hour) to P32,000/ MWh and the secondary price cap mechanism was imposed, and effective settlement spot prices ( ESSP) reached its lowest in January 2017 at P1.90/ kWh since January 2011. ESSP is the average price paid by wholesale customers for energy purchased from the WESM. The average ESSP from June 26, 2016 to June 25, 2017 is P3,074/ MWh, according to the annual report.

Significant changes in these figures resulted in customer confidence, helping increase the supply sourced from the spot market. For the January 2017 billing period, wholesale customers sourced 23% of their requirements from the electricity bourse, the highest customer exposure since December of 2006.

PEMC, which is designated as the Central Registration Body by the Department of Energy ( DoE) and Energy Regulatory Commission, performs customer switching from one supplier to another supplier and handles information exchange and the establishment of a business- to -business system.

Modifications in Retail Rules and Retail Market Manuals have lowered the contestability threshold and retail aggregation. As stated in PEMC’s portfolio, up to 862 customers have exercised their option to source their electricity requirements from registered suppliers as of June 26, 2017.

The PEMC also enhanced the approval process of market membership, so companies can easily start their business in the power industry. Processing time of market membership upon completion of requirements has been reduced from 15 days to five days. From the initial WESM Membership of six participants in June 2006, the number has gone up to 269 participants in June of 2017. Meanwhile, a total of 966 retail market participants were recorded as of July 11, 2017.

San Miguel Corporation, First Gen Corporation, Aboitiz Power Corporation and Power Sector Assets and Liabilities Management are among the top major participant groups, with a market share of 19.8%, 16.1%, 14.4% and 12.1%, respectively.

Eleven years since WESM began commercial operations in Luzon and seven years after in the Visayas, PEMC is preparing for the imminent implementat ion of WESM in Mindanao. As for Ms. Ocampo, they have been fully supportive of the plan of the government to launch the same market in the region, which will foster transparency and rational pricing of electricity.

The WESM in Mindanao will give its residents more sources of electricity to choose from, thereby increasing their chances of lowerpriced energy, Energy Secretary Alfonso G. Cusi said in his message in the WESM annual report.

The launch of wholesale market in Mindanao was held in SMX Davao City on June 28, 2017. Trial operations program were performed two days prior to the launch which aimed at familiarizing the Mindanao participants in the implementation of the WESM via the market systems and procedures to be deployed.

“The DoE and PEMC will have more challenges to hurdle as we implement sound policies and plans in the years to come,” Mr. Cusi said. “Let us further strengthen our coordination with each other, especially as we prepare for the establishment of the Renewable Energy Market, the Reserve Market and the grid integration of Luzon, Visayas and Mindanao, in which PEMC will have an essential role to play.”

WESM was created by virtue of Section 30 of Republic Act No. 9136 or the Electric Power Industry Reform Act ( EPIRA) of 2001. The policy mandated the DoE to establish the WESM and provide its detailed rules, which were promulgated a year after.

In November of 2003, the PEMC was incorporated as a non-stock, nonprofit corporation registered with the Securities and Exchange Commission, and was designated to serve as the autonomous group market operator the following year.

After several months of trial operations, the WESM commercial operations officially began in the Luzon grid on June 26, 2006. Four years after, the Visayas grid was integrated into the WESM and commenced commercial operations on December 26, 2010.

PEMC has been consistent in igniting transformation in the Philippine electricity industry for 11 years. It is continually exploring new possibilities to sustain transparency and competition by enhancing the WESM design to let more end-users choose their suppliers and enjoy energy at lower prices.