Independent operator expected to handle WESM operations

MANILA, Philippines - Energy Secretary Jose Rene Almendras has expressed optimism that the wholesale electricity spot market (WESM) will be handled by an independent market operator (IMO) within the year.

WESM is currently run by the government through the Philippine Electricity Market Corp. (PEMC).

“On the PEMC side, I’m of the opinion that I would like to shift to the IMO model already. I want to transform the board into an IMO without me on it,” Almendras said.

Industry players had been criticizing the lack of initiative from the government to adopt the IMO scheme. Under the Electric Power Industry Reform Act (EPIRA) of 2001, an independent entity or IMO should have been appointed one year after WESM’s implementation. The WESM was formed and became operational in 2007.

WESM provides a mechanism for buying and selling electricity, whether these transactions are covered or not by bilateral contracts.

Pending the appointment of an IMO, an autonomous group market operator (AGMO) serves as WESM’s interim market operator. The board of PEMC presently acts as the AGMO but eventually, all the assets and liabilities, as well as functions of the AGMO, will be transferred to the IMO under a competitive bidding process.

Under the law, the IMO should hold the financial and technical capability to run WESM. The IMO must also have a proven track record of not less than two years as a leading market operator of a similar- or larger-sized electricity market.

“The mechanism we’re looking for right now is how to get that board elected, how to put that IMO board into place. I hope to do it within the year,” Almendras said.

He said they are awaiting the result of a study being conducted by the Asian Development Bank on the adoption of IMO in the Philippine WESM.

“The ADB actually has a grant that is funding a consultancy group that is going to advise us how to execute that IMO as best as possible,” he said.

Philippine Independent Power Producers Association president Ernesto Pantangco earlier said it would be best for the industry “if the electricity market is being managed and operated by the private sector.”

Late last year, the PEMC started its official IMO selection processes.

PEMC had approved the contract for the Australian partnership of Deloitte Touche Tohmatsu to become the auditor for the independent operational audit of the systems and procedures on market operations (IOASPMO) of PEMC.

The IOASPMO aims to review and assess the processes of the market management systems, market models, software, billing and settlement system, emanating from the submission of generation offers/bids up to the dispatch, and publication of market information under the WESM rules as approved by the DOE.

This audit will further validate the market operations’ performance towards its obligation to the electricity consumers and stakeholders set forth by the market rules and the orders of the Energy Regulatory Commission (ERC).

The selection of the auditor is one crucial move for the eventual transition for WESM being handled by an IMO.

The WESM began commercial operations in Luzon in June 2006. It is a centralized venue for buyers and sellers to trade electricity as a commodity where its prices is based on actual use (demand) and availability (supply).