Wholesale electricity spot market to proceed as planned in June ’04

The National Transmission Corp. (Transco) is confident that the trial operation of the Wholesale Electricity Spot Market (WESM) will commence on June 2004.

Transco’s optimism was anchored on the recent approval of the financing for the WESM by Japan Bank for International Cooperation (JBIC). The loan agreement was signed in Japan during the recent state visit of President Arroyo in the said country.

By February next year, Transco expects to put in place the Market Management System (MMS) which will provide the required infrastructure- hardware and software- to manage the bidding, pricing and settlement functions of the WESM.

Recently, the Transco, along with the Department of Energy (DOE), inaugurated the WESM office in Robinsons-Equitable Tower in Ortigas Center.

Republic Act 9136 or the Electric Power Industry Reform Act, which restructures the power sector, mandates the establishment of the WESM.

Once in place, WESM will empower consumers to choose their supplier of electricity with the main goal of purchasing the least cost of power.

The creation of the WESM is expected to result in higher efficiency of service, transparency in the generation charges and in the long term help reduce power rates. The demo market is intended to assist in a gradual implementation of the final WESM.

The DOE in consultation with the industry players has promulgated the WESM rules June 2002. The WESM rules govern the operation of the spot market by providing a mechanism that will identify and set the price of electricity between sellers and purchasers of power.

Under the proposed WESM structure, the generation companies will submit offers on an hourly basis. A generator, which would like to receive priority dispatch of electricity into the system, must submit a very low price offer. Price offers received by the market will be ranked accordingly from the lowest to highest. Suppliers submitting very high price offers may run the risk of not being dispatched given the forecast demand for the hour.

It is expected that the electricity cost will go down by about 40 centavos per kilowatthour once the WESM is established.