Power spot market readies shift to independent operator

Manila, Philippines -  The government is preparing for the shift in the power spot market operator from the Philippine Electricity Market Corp. (PEMC) to an independent market operator (IMO).

Accordingly, Joint Congressional Power Commission (JCPC) members are seeking more information on the plans for the Wholesale Electricity Spot Market (WESM), the country’s energy chief said.

“The senators and congressmen want to understand the structures how you shift to an independent market,” Department of Energy (DOE) Secretary Jose Rene Almendras said.

“The senators wanted to understand what is happening in other markets abroad and why we want to do it this way,” he said.

Pending the appointment of an IMO, an autonomous group market operator (AGMO) serves as the WESM operator.

To date, the board of the PEMC also acts as the AGMO. Eventually, all the assets and liabilities, as well as functions of the AGMO, will be transferred to the IMO under a competitive bidding process.

“We are ready to implement that. We are ready to do that. We have the transition framework mechanism,” Almendras said.

The Electric Power Industry Reform Act of 2001 mandates the appointment of an IMO a year after WESM’s implementation. The WESM was formed and became operational in 2007.

The shift to an IMO requires the recommendation of the DOE and the approval of the JCPC.

In the transition, the independent board will no longer be composed of government officials or stakeholders.

“The issue is you need a board that will sit above stakeholders who are not players in the industry because that board is the oversight to ensure that the market operates to the best interest of the consuming public,” Almendras said.

For instance, the DOE is not inclined to pursue a private sector model for the IMO.

“That means there are profits. We want to protect the status now, which is non-stock and non-profit,” Almendras said.

PEMC president Melinda Ocampo said the company is ready for the transition.

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.

Furthermore, the DOE is discussing if government representation will continue.

“There can be a government representative that will just sit as a member of the board. But the government will not be in a position to drive or to influence in any way,” Almendras said.

Industry stakeholders, for their part, will be able to participate in other committees of the PEMC, he said.

“There will be an oversight of course in case of an emergency,” he added.

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