Napocor to raise funds for electricity spot market project of Transco

The National Power Corp. (Napocor) will raise the funds for the establishment of the Wholesale Electricity Spot Market (WESM) and not the National Transmission Corp. (Transco).

Napocor acting president Roland S. Quilala made this clarification after the question of whether Transco could already borrow money was raised by some sectors.

"We have informed the Department of Finance about the issue on whether Transco could be allowed to borrow," he said.

Quilala said though it would be Napocor that would be borrowing the $40 million funding requirement for WESM, the proceeds from the loan would still go to Transco. "We would be borrowing on behalf of Transco," he said.

While Napocor is being refrained under the new Power Bill from borrowing, Transco also has no authority yet to borrow.

"Under the Electric Power Industry Reform Act of 2001, all the assets of Napocor will be transferred to the Power Sector Assets and Liabilities Management Corp. (PSALM), which in turn will transfer transmission facilities to Transco. But the transfer is not yet firmed up," Quilala said.

The move to allow Napocor to borrow on behalf of Transco will enable the latter to meet its target to commence with the establishment of the WESM in November this year.

Last June, the Department of Energy (DOE) promulgated the WESM rules. The creation of the WESM is provided for under the provisions of the EPIRA.

Under a deregulated environment, electricity will be traded electronically on an hourly basis. WESM’s operation is likened to the stock market or a local market where we are buying and selling commodities.

Once the WESM is in place, consumers will be able to choose their supplier of electricity. Initially, big users such as the industries, utilities and electric cooperatives will directly benefit from this, given the large electricity demand that they need.

Since the utilities, industries and cooperatives are given the choice where to get their electricity supply, it is expected that they are going to purchase electricity with the least cost.

Given that the electricity will be traded in an hourly basis, the generation portion of unbundled electricity rates will be seen fluctuating to reflect the supply and demand in the WESM.

As in the liberalized environment, market forces will determine the price of electricity which could eventually lead to lower power rates to end-consumers.

Small consumers like households in one village will also be given the same empowerment with those large users. Through the so-called aggregation process, the small loads of users in a certain area could be combined by a load aggregator to meet the required demand.

These load aggregators, through the license granted by the Energy Regulatory Commission (ERC) will function like the middleman in traditional commerce who could buy electricity in the spot market on behalf of the small consumers.

Under the interim market structure, market participants particularly generation companies will submit offers to sell energy by offering it for sale at a certain price on an hourly basis.

A generator, which would like to receive priority dispatch of electricity into the system, must submit a very low price offer. Price offers received by the market will be ranked accordingly from the lowest to highest. Suppliers submitting very high price offers may run the risk of not being dispatch given the forecast demand for the hour. – Donnabelle Gatdula