Statement of PSALM President Nieves L. Osorio in response to the statement released on 22 November 2006 by the Philippine Electricity Market Corporation (PEMC) to correct breach of WESM trading rules

22 Nov 2006

The Power Sector Assets and Liabilities Management Corporation (PSALM) is awaiting the official report of the Market Surveillance Committee (MSC) of the Philippine Electricity Market Corporation (PEMC) on its investigation of alleged price manipulation in the Wholesale Electricity Spot Market (WESM).

The MSC, in a media statement released yesterday, has determined that PSALM "has behaved anti-competitively and abused market powers during peak hours in the billing period 26 August-25 September 2006 following offers of unusually high, similar price bids in the third month of WESM's operations."

"We still have to receive a copy of the official report, which we understand was released today (Wednesday, 22 November). We will study the report as soon as we receive it," said PSALM President Nieves L. Osorio.

"We are aware that all participants in WESM, including PSALM, National Power Corporation, Meralco (Manila Electric Company) and other electric distributors, are learning a new and quite complex market system," Ms Osorio noted. "This is the reason we welcome the recent signing of the supply contract between National Power and Meralco as this will help shield consumers from the price volatility that normally characterizes a commodity spot market."

"We also welcome the steps undertaken by the ERC (Energy Regulatory Commission) in the determination of the universal charges, which include stranded contract cost, as this will enable National Power to recover the cost of putting up these plants over a longer period of time," Ms. Osorio said.

"We are aware that our traders are under tremendous pressure to recover the huge losses incurred during the first two months of WESM operations when the load weighted average prices or LWAP were way below the rates previously approved by the ERC," she added. "We believe that our traders acted in good faith."

"We are reviewing our operations and adopt necessary measures to ensure that WESM will continue to work to allow competition to force cost efficiencies in the power generation business for the benefit of consumers," Ms. Osorio said.

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