The Department of Energy (DOE)'s press release on the on-going investigations by the Philippine Electricity Market Corporation (PEMC) on the changes in the behavior of electricity prices in the Wholesale Electricity Spot Market (WESM)

06 Oct 2006

The ongoing investigations by the Philippine Electricity Market Corporation (PEMC) on the changes in the behavior of electricity prices in the Wholesale Electricity Spot Market (WESM) are part of the regular and continuing monitoring and surveillance process by the Market Operator to ensure transparency and integrity of the conduct of operations in the spot market, Energy Secretary Raphael Lotilla today said.

“We are allowing the processes and mechanisms under the WESM Rules to take their due course with regard to the on-going investigation being conducted by PEMC on possible price manipulation”, the Secretary said.

The WESM Rules provide for sufficient safeguards and mechanisms to ensure integrity of the spot market operations.

The Secretary said there is the Market Surveillance Committee (MSC) under the PEMC Board which monitors market activities and assist the PEM Board in investigating and imposing appropriate penalties for breaches of the WESM rules and anti-competitive behavior of market participants.

In addition, the Department of Energy (DOE), the Energy Regulatory Commission (ERC) and PEMC have earlier formed a Tripartite Committee to safeguard consumers against any extreme price volatility which could occur during the first year of the WESM operations. The start of the commercial operations in the energy market for the Luzon grid was declared on June 26, 2006. The Philippine WESM, the second in ASEAN to have an electricity spot market next to Singapore, is a milestone in the Philippine power industry reforms.

Foremost, the Tripartite Committee addresses market price contingencies during this early stage. These contingencies include excessive increases in market prices. The Committee is therefore expected to apply pre-emptive measures as needed.

“Safety measures over and above those already built into the system and the WESM rules, which govern the day to day trading behavior of the participants and prevent collusion, withholding of energy and other forms of anti-competitive behavior have been put in place to ensure transparency, reliability and competitive character of the WESM”, Secretary Lotilla stressed. In addition, the ERC retains its regulatory powers over the market.

The WESM is governed by an independent board, with a majority of the members comprised by stakeholders. As provided for in the WESM Rules, the Board consists of: one (1) Director representing the Market Operator; one (1) Director representing the National Transmission Corporation (TRANSCO); four (4) Directors from the Distribution Sector; four (4) Directors from the Generation Sector, one (1) Director representing the Customer; and four (4) Independent Directors. The DOE Secretary acts as the first Chairperson. Under the Board are the different Committees, consisting of the Rules Committee, the Disputes Committee, the Market Surveillance Committee, the Technical Committee, and the PEM Auditor.

“Just like any other starting company which suffers birth pains, WESM is also a new market and is likely to experience the same. On-going investigations however, will not affect investors’ confidence because as early as now it shows that the processes and mechanisms set in place against unlawful trade practices are already working.

“In the meantime, while the investigations are on-going, we will continue to work to allow competition to force cost efficiencies in the power generation business and bring about benefits to the end consumers,” the secretary stressed.

Strategic Communications and Partnership Division
Tel. No. (632) 9029067