ERC to toughen up surveillance and monitoring at WESM

By Myrna M. Velasco – May 14, 2019, 10:00 PM
from Manila Bulletin

To prevent gaming and abuse of market power by generation company-trading participants, the Energy Regulatory Commission (ERC) has engaged an American firm-consultant so they can toughen up surveillance and monitoring at the Wholesale Electricity Spot Market (WESM).

ERC logo(Photo courtesy of www.erc.gov.ph)

ERC logo(Photo courtesy of www.erc.gov.ph)

This developed as the deregulated power industry is being bedeviled anew with allegations of market collusion. ERC Chairperson Agnes T. Devanadera indicated it is high time that stricter regulatory tools will be administered upon the market.

Already, the Commission has tapped foreign consulting firm Potomac Economics Ltd./PE Software Analytics to aid the regulatory body in the creation of “market analysis framework” for surveillance and monitoring activities in the WESM.

Devanadera said the engagement of the US firm had been in line with “the need to continuously capacitate our technical personnel to effectively perform our mandate of monitoring the electricity market and enforce applicable rules and regulations.”

It is worth noting that it was already the third time this year that allegations of “market gouging” had been thrown against trading activities at the WESM – the very first one in 2007 spotlighted state-run Power Sector Assets and Liabilities Management Corporation (PSALM) as the alleged culprit, but the company was acquitted then by the ERC.

The second one was in November-December 2013 when simultaneous maintenance shutdowns and forced outages of power plants transpired – and was supposed to result in higher power rates for consumers had it not been stopped by an interim court ruling.

The 2013 events considerably mirrored this year’s incidents of forced outages in power facilities.

With the ERC’s foreign consultant in tow, Devanadera sounded off that such “will ensure that abuse of market power or anti-competitive behavior will be adequately addressed.”

Nevertheless, the chief industry regulator has not given commitment on how “uncompromising” the ERC shall be in indicting “market gamers” and violators.
She further qualified that “having the contract for the WESM monitoring and surveillance awarded to Potomac, the ERC will be able to cope with the unique behaviors and sophisticated bidding and supply strategies of spot market participants.”

Devanadera similarly emphasized that the reinforcement on spot market surveillance “is also in preparation for the forthcoming commencement of the trading for ancillary services or the reserve market.”

The proposed reserve market had been delayed for almost a decade already – and that is a component that should have been helping save the grid from rotating brownouts when there is deficiency in supply.

With the reserve market, the generation company-traders in the spot market would be able to co-optimize their market offers by combining tenders for both energy and ancillary services – and in the process, may result in lower prices for consumers.

Devanadera expounded that “with the engagement of Potomac, it is expected that the ERC’s technical staff will be able to prepare monthly, quarterly and annual state of the market reports – including but not limited to price outcomes and bidding behavior containing information drawn from the market monitoring analysis framework and monitoring tools to be developed by the consultant.”

To prevent gaming and abuse of market power by generation company-trading participants, the Energy Regulatory Commission (ERC) has engaged an American firm-consultant so they can toughen up surveillance and monitoring at the Wholesale Electricity Spot Market (WESM).

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