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Wholesale electricity spot market starts in central Philippines

One of the cornerstone market devices established under the Philippine 2001 Electric Power Industry Reform Act is the establishment of a wholesale electricity spot market (WESM).

The Act envisions that the establishment of the WESM will facilitate the competitive scheduling and dispatching of power plants in an optimal and transparent manner. The WESM is expected to (i) provide a mechanism for setting the price of energy quantities not covered by bilateral power supply contracts and of variations between scheduled and actual dispatch; (ii) enable power generators to sell power, and at the same time, allow suppliers and wholesale consumers to purchase electricity, even if there is no bilateral contract between the two; and (iii) establish a merit order dispatch system for generation whether or not they have bilateral contracts.

The Department of Energy (DoE) issued implementing rules and regulations governing the operation of the WESM in June 2002. Commercial operations for the WESM in the Luzon grid (Luzon is the largest island composing the Philippine archipelago) were launched in June 2006. Pursuant to DoE Circular No. 2010-11-0012, commercial operations of the WESM in the Visayas grid (the group of islands comprising the central Philippines) commenced on December 26 2010. The Visayas WESM was integrated with the Luzon grid on the same date.

Under the Circular, electric industry power participants (those injecting electricity to, or withdrawing electricity from, the grid, such as generation companies, distribution utilities and other customers) and service providers (the system operator, and network, ancillary and metering service providers) were to register with the Visayas WESM before the commencement date.

All generation companies were required to ensure the availability of their existing and new generating capacity commitments to the DoE, while distribution utilities and customers were instructed to ensure that their electricity requirements are adequately covered by bilateral power supply contracts.

Jennifer I Lim

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