Viewpoint: Advisory to Mindanao Power Consumers on the Mindanao WESM Being Proposed by the IEMOP

By David A. Tauli, President – November 16, 2019
Mindanao Coalition of Power Consumers

Note first that the Wholesale Electricity Spot Market in Mindanao is still being proposed for establishment by the Independent Electricity Market Operator of the Philippines (IEMOP). The Mindanao WESM cannot yet be established as an extension into the Mindanao grid of the Philippine WESM, which is now operating in the interconnected power grids of Luzon and the Visayas, because there is no transmission line that connects the Mindanao grid to the Visayas grid.

However, the press briefings that have been issued by the IEMOP in their ongoing information campaign throughout Mindanao make it appear that there is an existing Mindanao WESM that is now ready to become operational. If that is the case, then the IEMOP is trying to smuggle into Mindanao a WESM for which there is no legal basis and no economic justification for existence.

There is no legal basis for the establishment of an isolated WESM in Mindanao because the EPIRA does not provide for the establishment of such, and no law has been passed by the Philippine Congress for the establishment of an isolated WESM anywhere in the Philippines. Hence, the IEMOP is trying to establish a VOLUNTARY market for electric power in Mindanao. A voluntary market is one that can be established only upon agreement by the producers and consumers in such a market – the generating companies, the distribution utility companies, and large end-use customers in the case of an electricity market.. But there is no economic justification for the establishment of a voluntary WESM in Mindanao.

A voluntary WESM cannot be established in Mindanao because the production of electricity is controlled by only a few generating companies – two or three companies atmost in the case of the markets for electric power supply for intermediate loads or for peaking loads. (Note that markets for base loads, for intermediate loads, and for peak loads are three different markets. For each market or market segment there must be a sufficient number of producers to allow for free competition.) Where markets cannot exist because a truly competitive condition cannot be established among the producers, the buying and selling of the non- commodity is regulated – by the Energy Regulatory Commission in the case of electricity.

So what is this Mindanao WESM that the IEMOP is trying to establish, with the cooperation (“connivance” may be the more accurate word) of the PEMC and executive officers in the Department of Energy? Who benefits from the establishment of a Mindanao WESM? Obviously, the establishment of a “market” that is controlled by oligarchs cannot benefit power consumers. That is because there can be no free competition among the few producers that could bring down prices in any of the electricity market segments in Mindanao.

It is only the generating companies that would benefit from the establishment of a Mindanao WESM. The MWESM would allow the generating companies to sell their products at prices higher than the rates approved by the Energy Regulatory Commission. Exorbitant prices always result in an oligarchy. It is quite obvious that only the generating companies would benefit from the establishment of a Mindanao WESM. What is not so obvious is the reason why the supposedly independent IEMOP is working on the establishment of a “market” that would benefit only the generating companies, while resulting in higher prices paid by power consumers. Has the IEMOP now taken on the role of ensuring the profitability of the generating companies in Mindanao, particularly the coal companies that have been bleeding heavily since the start of their operations? Is the IEMOP also guaranteeing the profitability of generating companies in Luzon and the Visayas at the expense of power consumers?

It is also not clear why the PEMC (which governs the Philippine WESM to ensure that prices for bulk generation are fair and reasonable) and officers of the DOE (who are mandated to ensure that there is no overpricing of energy by the producers) have been  trenuously working since 2016 to establish a Mindanao WESM. Have they been paid by the generating companies to do so?

Whatever the motivations of the significant people in the electric power industry in the Philippines for carrying out massive publicity campaigns for the establishment of a WESM in Mindanao, now is the time for power consumers in Mindanao to stop the creation of an institution that would only enrich the oligarchs while impoverishing the consumers.