DOE examines linkage of power markets to stock exchanges

By Myrna M. Velasco – January 22, 2018, 10:00 PM
from Manila Bulletin

Before rendering any decision to the proposal of the Philippine Stock Exchange (PSE) to take over the operations of the Wholesale Electricity Spot Market (WESM), Energy Secretary Alfonso G. Cusi told reporters that they will carefully examine first the amalgamation of power spot markets to that of stock exchanges as may have been done in other jurisdictions.

Alfonso G. Cusi

                       Alfonso G. Cusi

“I have the responsibility to look at that…I am benchmarking also as to how the other countries are doing it,” the energy chief said.

He mentioned that initial scrutiny being done by the DOE is that of Tokyo Commodity Exchange, Inc. (TOCOM), Japan’s one-stop marketplace for trading of commodities and financial products, such as futures or derivatives transactions.

Nevertheless, for that country’s day-ahead and intra-day auction of power capacities, this is still done under the Japan Electric Power Exchange (JEPX).

TOCOM is a fusion of J-Gate (Japan Global Access Trading Engine), which is Osaka’s trading system for derivatives; and that of JPX or the Japan Exchange Group which operates Japan’s multiple securities exchanges, including those of Tokyo Stock Exchange and Osaka Securities Exchange.

That was formed in 2013 and followed the business model on trading system of derivatives instituted by NASDAQ stock market of the United States, the second largest exchange in the world by market capitalization, next to the New York Stock Exchange.

As noted by energy experts, what is apparent actually in experiences of various countries is the merger of the two markets when it comes to derivatives transactions and as ‘futures market’ of commodities.

Cusi said firming up the study on the PSE proposal is being pursued parallel to the incorporation of the Independent Market Operator (IMO) being pushed for the country’s WESM, that based on the energy chief’s assessment would likely be completed June this year.  “According to the timeline that we discussed, we’re going to realize the IMO by June, 2018,” he said.

Data furnished to Manila Bulletin show that aside from TOCOM and NASDAQ though, most of the power spot markets and stock exchanges worldwide still thrive separately on their classified functions.

In particular, the energy spot markets of the United Kingdom, Netherlands and Belgium are under EPEX Spot or APX Group; while their stock exchanges are the London Stock Exchange, Euronext Amsterdam and Brussels Stock Exchange, respectively.  Additionally, energy commodities trading are also done separately in the New York Mercantile Exchange, in the case of America’s biggest market.

Asian neighbors in Singapore, Australia, South Korea and India also have detached energy spot markets from their stock exchanges. Australia has National Electricity Market for power and has its Australia Stock Exchange as a separate entity; Singapore also has its National Electricity Market for spot power trading apart from its Singapore Exchange Limited or SGX for stocks; India has India Energy Exchange (IEX) for day ahead auctions and term ahead transactions for energy while its National Stock Exchange exists distinctly; and South Korea has Korea Power Exchange (KPX) for energy trading while its Korea Stock Exchange (KOSPI) thrives separately.

Other power markets that have successful operations of independent or autonomous energy spot markets have been those of: Pennsylvania-New Jersey-Maryland Interconnection of the United States; Nordpool Spot of the Europe’s Nordic region; the Iberian Electricity Market of Spain and Portugal; Moscow Energy Exchange (MOSENEX) of Russia; the BSP Southpool Energy Exchange of Italy, Austria and Slovenia; Croatian Power Exchange Ltd. (CROPEX) of Croatia; European Energy Exchange (EEX) of Germany, to which market is also linked with the APX Group; ELEXON as balancing and settlement market for the United Kingdom; Energy Exchange Istanbul (EPIAS) for Turkey; Hungarian Exchange (HUPX) for Hungary’s day-ahead, intra-day and physical futures spot market for energy; Independent Bulgarian Energy Exchange (IBEX) for day-ahead power auctions in Bulgaria; the OTE as gas and electricity market operator of Czech Republic and TGE as Poland’s Power Exchange.