Govt issues draft policies on power-market operator

By Lenie Lectura – 
From Business Mirror

THE country’s trading floor for buying and selling electricity would be led by an independent market operator (IMO) whose members do not have any ties with the government and power-industry participants.

This was stated in the Department of Energy (DOE) draft circular, entitled “Adopting Policies for the Efficient Transition to the IMO for the Wesm [wholesale electricity spot market]”.

“The directors of the IMO board shall be independent from the electric power-industry participants and from the government,” the draft circular stated. The circular also proposes that the board of the IMO be composed of at least five members, whose composition and specific qualifications are approved by the DOE.

The agency is soliciting comments on the draft circular. It will accept comments until November 15.

An IMO board shall be deemed independent if it’s composed of a member who “is not a director, officer, employee, contractor, consultant, agent, adviser, legal counsel, manager or shareholder of a WESM member or the ‘System Operator.’”

Also, the draft circular states that a member of an IMO board is not an official of employee of the government; has not been employed as an officer or in a supervisory or managerial capacity by an electric power-industry participant or associated with a WESM member within one year prior to nomination. The IMO board member should agree not to be employed by a company affiliated with a WESM member of the System Operator within one year after the person ceases to be a member of the IMO board.

This is meant to dispel concerns of continuing government intervention at the WESM.

At present, the WESM is operated by the Philippine Electricity Market Corp. (PEMC). PEMC, which was incorporated in 2003, is a 15-man body led by the secretary of the DOE and composed of representatives from each sector of the electric power industry, as well as independent members.

The PEMC was constituted as the autonomous group market operator to oversee market governance and perform the functions of the market operator in the Wesm.

Under the Electric Power Industry Reform Act of 2001, the PEMC is supposed to last for only one year and would transition to an IMO. So far, PEMC has existed for 12 years now.

“The objectives of the WESM are to establish a competitive, efficient, transparent and reliable market, where a level playing field exists, prices are governed as far as practicable by commercial and market forces and efficiency is encouraged,” the draft circular stated.

The DOE, in its draft circular, proposed that PEMC remains the government arm of the WESM.

To note, the PEMC identified a number of power firms that breached the WESM rule on must offer during November and December 2013. 

Under the must-offer rule, generation companies registered in the WESM must declare and offer the maximum generating capacities of their power facilities in the spot market. 

Separately, the Energy Regulatory Commission (ERC) conducted a probe among WESM participants that were allegedly engaged in anti-competitive behavior and abuse of market power. It has identified 12 generation firms that withheld their capacity during the October to December 2013 supply months. This resulted in record-high generation charge of Manila Electric Co. to P9.10 per kilowatt-hour in December 2013.

At present, PEMC is being led by a five-man transition committee composed of the following: former ERC Chairman Oscar Ala as PEMC president; Francis Saturnino Juan, former ERC executive director; Rauf A. Tan, former ERC commissioner; Jose Mari T. Bigornia; and concurrent chairman of the National Renewable Energy Board Jose M. Layug.

Energy Secretary Alfonso G. Cusi sits as PEMC chairman. Aside from Cusi, the PEMC board is being governed by Ronald Dylan P. Concepcion, Victor Emmanuel B. Santos, Emmanuel V. Rubio, Neeraj Bhat, Deon James, Rolando M. Cagampan, Octavius M. Mendoza, Allan L. Laniba, Noel V. Aboboto, Jesus L. Arranza and Peter L. Wallace. 

A department circular gives the committee seven months from August 1 to complete its tasks, while PEMC transforms into an IMO.