On the Proposed Establishment of a Mindanao Wholesale Electricity Spot Market

Dec 1, 2017

by David A. Tauli

David A. Tauli

David A. Tauli

1. The extension of the Philippine Wholesale Electricity Spot Market (WESM) to Mindanao or, stated another way, the incorporation of the Mindanao Grid into the Philippine WESM, is legally and technically possible only when the Visayas-Mindanao Interconnection Project (VMIP) is implemented.

Since the  National Grid Corporation of the Philippines (NGCP) estimates that the VMIP can be completed only by 2022, it will be only then that a Mindanao Wholesale Electricity Spot Market can be established within the framework of the Electric Power Industry Reform Act of 2001 (EPIRA).

2. Therefore, if a Mindanao WESM is to be established before the completion of the VMIP in 2021, it must be established as an independent WESM, physically and operationally isolated from the Philippine WESM. 

In order that this can be done, an enabling law must be passed directing the Department of Energy to establish a voluntary WESM in Mindanao that is independent of the Philippine WESM.

3. The Mindanao WESM must be established only if it can be shown to result in the reduction over the long term of the prices or rates paid by consumers for bulk power supply, as compared with projections assuming the current situation of power supply rates in Mindanao.

4. The Mindanao Coalition of Power Consumers (MCPC) takes the position that the enabling law for the isolated Mindanao WESM must have the following provisions:

4.1 The Mindanao WESM must be a voluntary market and not a mandatory market, to be participated in by distribution utility companies, generating companies, and other parties at their own discretion.

4.2 The operation of the Mindanao WESM must be governed by least-cost economic dispatch (LCED), in which the prices of the generating plants submitting an offer to be dispatched are determined by their rates as approved by the ERC in the case of generating plants with existing power purchase agreements (PPAs) with distribution utility (DU) companies, and determined by their submitted bid in the case of generating plants whose output is not covered by PPAs.

The result of LCED is that the generating plants that are dispatched will be paid in accordance with their approved rates or will be paid as bid, unlike in the Philippine WESM where the price for all energy dispatched at each hour or bidding interval is the highest bid that is accepted by the Market Operator at that interval.

4.3 The participation in the Mindanao WESM by distribution utility companies (electric cooperatives and investor-owned DUs) should be approved by the majority of their consumers in the case of the Investor-owned DUs and by the majority of their member-consumer-owners in the case of the electric cooperatives.

4.4 The enabling law must include implementable safeguards and stringent penalties that could effectively militate against collusion in the Mindanao WESM

5. The MCPC will support the establishment of an isolated Mindanao WESM if the foregoing conditions are incorporated into the enabling law for the establishment of the Mindanao Wholesale Electricity Spot Market.

(Engr. David A. Tauli is the president of the Mindanao Coalition of Power Consumers, MCPC)

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