Electricity spot market operations in Luzon start in May

06 Mar 2006

The commercial operations of the wholesale electricity spot market (WESM) in Luzon will start in May as soon as the Energy Regulatory Commission (ERC) approves the spot market's pricing mechanism.

This was disclosed by Lasse A. Holopainen, president of the Philippine Electricity Market Corp. (PEMC) which will handle the WESM operations, during a recently-held bidders' forum attended by local and foreign investor groups who have formally signified to bid for the four power plant packages being offered this year by the Power Sector Assets and Liabilities Management Corporation (PSALM), the agency tasked to privatize the generation assets of National Power Corp.

"WESM is a precondition for open access, a significant component of the ongoing restructuring and privatization of the power industry," Holopainen stressed. "It will parallel the privatization program for generation and transmission assets."

Designed to "change the existing monopoly in the electric power industry to a competitive market," WESM will ensure more affordable electricity prices for residential, industrial and business consumers, he said. Through the spot market, the Philippine power industry will build the foundation for open access and retail competition. This entails the deregulation of the supply side of the market.

The WESM structure, "where participants will facilitate the trading of electricity and where third parties will be granted access to the power system," will allow market forces to determine prices that will consequently "encourage efficiency and competition." A dynamic market will give generators the leeway to reduce electricity prices, Holopainen said.

Organized by PSALM, the bidders' forum also informed investors about the current state of readiness of WESM. Holopainen disclosed that WESM rules have been drafted and approved. The PEMC has also substantially completed the manuals and procedures that will govern the electricity spot market. Pricing mechanisms have already been filed with the ERC for review and approval.

The PEMC has likewise set a functional Locational Marginal Pricing Market Management System that recently passed an independent international auditor review. "I believe we have set a new international benchmark in terms of development time and cost," Holopainen said.

To ensure the readiness of the electric power industry on WESM, the PEMC conducted intensive orientation and training of over 100 companies on spot market operations through hands-on simulations. "The WESM board has also approved a project to support electricity cooperative readiness," Holopainen said.

Saying that WESM is already on the take-off stage, Holopainen sought the active participation of investors and market players in the electricity spot market. He also assured WESM participants of a level playing field by providing equal access to information that will help them "understand and increase compliance with WESM rules."

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