This has been one of the key provisions set forth in Senate Bill 1929 which is pursuing some amendments in the Electric Power Industry Reform Act.
As prescribed, the proposed measure sets that "to encourage and promote the development of the WESM, distribution utilities with demand levels of not less than 100 MWs are required for the first three years," immediately following the establishment of the spot market, to source from the WESM at least 10 percent of their supply of electricity for retail to end-users.
In that same provision, it was stated further that "the said 10 percent shall gradually be increased at the rate of 2.0-percent every year up to the eighth year from the establishment of the WESM in order to reach a level of 20 percent."
It was also placed in the hands of Congress to eventually push for further revisions of the law if it wants to further jack up the level of DUs supply procurement from the pool market.
In a public hearing, Philippine Electricity Market Corporation (PEMC) president Lasse A. Holopainen stressed that he is amendable to some form of flexibilities in the supply procurement of the DUs from the WESM or through bilateral contracts; as long as this would allow both electricity buyers and sellers to be able to manage their market risks.
The key role that the WESM would have to play in fostering competition in the deregulated power industry; would be that it is envisioned to set in place the reference market price; which could also be set as a basis for the distribution utilities in cornering their supply via bilateral contracts.
At this stage, WESM is banking on catering to the forecasted supply-demand, as its jumpstart point of trading in the pool.
The PEMC, which currently stands as the WESM’s interim market operator further advocated that the prescription for mandatory trading in the pool market, should only be limited to at least five years.
"We believe that mandatory participation in the market for the first 5 years is already sufficient to encourage growth and development of the WESM," the PEMC has stated in its position paper submitted to the Senate.
The market operator further stressed that electricity trading in the WESM is established upon basic principles of giving both "the opportunity for generators to make profit and for customers to purchase electricity at their own prices, thru demand bidding."
Holopainen assured that market abuses, such as exorbitant pricing, would certainly not be encouraged, as any attempt of market gouging or anticompetitive behavior would be placed under very close scrutiny of the Energy Regulatory Commission (ERC), which is the industry’s envisioned independent and strong regulatory body.
It was further pointed out that ¡§it is the ability of the WESM to sellers that sustains it, and to achieve this and to ensure the viability of a competitive spot market, "the market players should be allowed to manage their own risks without excessive restraint."
In this light, the PEMC takes the position that mandatory participation must not be explicitly embodied in the law after the first five years of the WESM’s operation. (MMV)
