PSALM president Edgardo del Fonso said this process will allow them to test if the WESM system will work or not.
Del Fonso said the establishment of WESM should be finalized before PSALM proceeds with the sale of the generation assets of the National Power Corp. (Napocor).
"We are hopeful that we can implement the demonstration sale within the month of May shortly before we privatize the generation assets of Napocor," Del Fonso said.
He said they are presently firming up he negotiations for the project’s funding which is expected to be jointly provided by the Asian Development Bank and Japan Bank for International Cooperation (JBIC).
ADB and JBIC are expected to provide some $40 million each to finance the establishment of the final WESM and other related projects.
The government decided to do away with the proposed interim WESM after the World Bank refused to recognize the winning bidder for the project’s test period.
The WESM is one of the crucial elements of the power sector’s restructuring as embodied under Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA).
Under the EPIRA, the government, through the Department of Energy (DOE), shall form a WESM, similar to that of the local stock market, where electricity could be traded.
Based on the proposed WESM structure, the generation companies will submit offers 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 dispatched given the forecast demand for hour.
Once the WESM is set up, it is expected that the electricity cost will go down by about 40 centavos per kilowatthour.