Electricity spot market in Mindanao to reduce rates, attract investors

MANILA, Philippines –  The trading of energy units, which are parts of efforts to pull electricity rates down and attract fresh investments in Luzon and Visayas, will commence in Cagayan de Oro city in March.

The Philippine Electricity Market Corp. (PEMC), which facilitates the trading of energy units, has been directed by the Department of Energy (DOE) to begin the process of creating an interim electricity spot market in Mindanao as part of efforts to solve the critical power supply situation on the island.

The electricity market will be a system for effecting purchases through bids to buy and sell electricity as a commodity. Decreasing the price of power that consumers pay for is the sole goal of the Wholesale Electricity Spot Market (WESM), which has been operating in Luzon since June 2006 and in the Visayas since December 2010.

Rolling out the same in Mindanao has been delayed since the power generation market there has been mostly government’s and the island is highly dependent on power generated from hydropower complexes. While these have kept the electricity rates in Mindanao lower than in other parts of the country, these resulted in lack of fresh investments in generation facilities.  

According to the DOE, the new Interim Mindanao Electrcity Market (IMEM) will act as a ‘day ahead’ market wherein market participants submit their nominations a day before the delivery of curtailment of energy.

The trading platform aims to address the power supply crunch in Mindanao that has been causing rolling blackouts over the past years.  

Mindanao needs some 200 MW in additional supply. The new electricity market hopes to free up as ouch as 360 megawatts in embedded capacity. 

The new electricity market will also encourage a favourable business environment. The department aims to provide a governance framework for the interim trading floor that would ensure ‘free and fair competition’ and public accountability in the electricity supply business.

The IMEM will also provide a settlement based on a uniform pricing framework settled at the market clearing price with which the total cost shall be allocated among participants.

“All generation capacities, directly connected customers and distribution customers shall be part of a mandatory program that aims to address only the deficiency of supply in the grid,” the DOE said in a circular released to the energy department.

However, according to a recent article published by a Mindanao based newspaper, the island is “not yet ripe” for the Interim Mindanao Electricity Market (IMEM) due to the power shortage situation.

“It is premature, not conducive at this time. The spot market will be fair only if there are both premiums and discounts,” said Roderico Bioco, president of the Bukidnon Kaamulan Chamber of Commerce and Industry Inc.

“Tradable volume is really small yet,” he said during the business group’s general membership meeting.

In October 2012, the Energy Department announced an electricty spot market in Cagayan De Oro would be established by March 2013.

The PEMC, which was established in 2003, has been operating the WESM in Luzon and Visayas. The supply of power is meant to increase over time, creating competition that results in a lower price.

WESM was created following the restructuring of the energy sector under Electric Power Industry Reform Act (EPIRA) of 2001. – Rappler.com