WESM unit pushed for efficient monitoring and surveillance

by Myrna Velasco, February 5, 2015
from Manila Bulletin

To prevent recurrence of the market distortion on when electricity rates spiked by record levels of P4.50 to P5.00 per kilowatt hour (kWh) in November-December 2013, it was propounded that an efficient and proactive market monitoring and surveillance unit be established at the Wholesale Electricity Spot Market.

This was recommended by Geir Holler, manager for business development of Norwegian firm Statkraft in his presentation at a forum on energy market regulations arranged by the Norwegian Embassy.

He explained that the market monitoring and surveillance group must be very keen and effective in pinning down suspected abuses or market manipulation in an electricity spot market, so it can sustain the credibility of the market’s processes and at the same time protect consumers’ welfare.

“This unit should crack down on market abuse immediately if and when it happens,” he said, and that this body must have “the primary tool to check market behavior rather than price capping.”

There had been degree of dissent from some industry players when the Energy Regulatory Commission (ERC) rendered in its March 2014 ruling the reduction in WESM prices for the questioned trading months of November-December 2013 when supply hit critical level due to the shutdown of the Malampaya gas production facility.

The regulators, however, stood pat with their decision, hence, the affected power generation companies took the recourse of elevating their cases to the courts.

At this point though, the players in the power industry as well as the regulators and the policy-framers at the ERC and the Department of Energy (DOE) are one in saying that there are needed improvements that must be instituted in the regulatory frameworks as well as in the processes and rules in spot market operations.

Tonci Bakovic, chief energy specialist of the International Finance Corporation (IFC), on the other hand, has sounded off that the repetitive hankering of some groups to tweak the Electric Power Industry Reform Act (EPIRA) must be given some time off.

“Don’t change the EPIRA law. If needed, only fine-tune the legislation like some countries (i.e. Chile. Colombia and Brazil) did it…fine-tune it with secondary legislation or secondary norms,” he stressed.

In terms of addressing volatility in spot market prices, Bakovic has noted that rule-framers and regulators can “consider introducing capacity payments to reduce price volatility, same as Chile and Colombia have done.”

He qualified though that they must “limit that volatility to transactions among generators by asking the demand to be fully contracted…allowing distribution companies to call for auctions periodically and allowing the auction price to be the pass-through to the end-user tariff.”

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