RP launches Asia’s first wholesale electricity spot market

The Department of Energy (DOE) and the National Transmission Corp. (Transco) have launched the first wholesale electricity spot market (WESM) in Asia at the Robinson’s Equitable Building in Ortigas Center, paving the way for the start of a WESM demonstration market.

"Making the power generation sector fully competitive requires the establishment of the WESM. The WESM is the market where the trading of wholesale electricity will be made. It will provide the mechanism for setting the prices for the short-term buying and selling of bulk electricity in a competitive environment." Energy Secretary Vincent Perez said.

"With WESM in place, competition in the generation of electricity will be encouraged, leading to a more efficient and reliable power sector," he added.

"This event marks a significant milestone in our continuous drive toward power sector reforms. We are privileged to be part of government’s thrust to make electricity prices more transparent and competitive," Transco president Alan Ortiz said.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Edgardo M. del Fonso earlier said the demonstration market process will allow the government to test if the WESM system will work.

"The demo market is seen to assist in creating a robust WESM, which we believe will positively impact on the marketability of the National Power Corp.’s generating assets as we start the privatization process," del Fonso said.

He explained that the demo market will allow generating companies to offer bids to sell electricity through the Internet to the market system operated by the DOE. Utilities or large users of electricity, in turn, will also offer bids to buy electricity.

Once in place, WESM will empower consumers to choose their supplier of electricity with the main goal of purchasing the least cost of power.

The creation of the WESM is expected to result in higher efficiency of service, transparency in the generation charges and in the long term help reduce power rates. The demo market is intended to assist in a gradual implementation of the final WESM.

The Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC) are expected to provide some $40 million each to finance the establishment of the final WESM and other related projects.

Based on the proposed WESM structure, the generation companies will submit offers on an hourly basis. Price offers received by the market will be ranked accordingly from the lowest to highest. Suppliers submitting very high price offers may run the risk of not being dispatched given the forecast demand for the hour.

It is expected that the electricity cost will go down by about 40 centavos per kilowatthour once the WESM is established.

Based on the plan, WESM will create procedures for establishing the merit order dispatch of power for each time period; determining the market-clearing price for each time period; administering the market; prescribing guidelines for the market operations in system emergencies; and oversee transaction billing or settlement procedures.