Gov’t determined to pursue wholesale electricity spot market

The government is determined to push through with the implementation of the wholesale electricity spot market (WESM) despite concerns of excess capacity in the system.

"WESM implementation will encourage competitive new entrants," Energy Secretary Vincent S. Perez said over the weekend.

Peter Wallace, an economist and president of The Wallace Business Forum Inc., said WESM is too complicated and even sophisticated countries have trouble implementing it.

"WESM is very technical and too complicated. It failed in California. Transmission and generation must be privatized first. It (WESM) can’t happen soon," Wallace said.

According to Wallace, "WESM will fail if there is an impending shortage. WESM is a spot market, if supply is inadequate, prices will go up," he said.

Bart Lucarelli, general manager of Quezon Power Philippines Ltd. Co., has also expressed concern if WESM will really work in the current setting.

"There is no guarantee that WESM can be successfully implemented in the Philippines and if successfully implemented, that it will lead to lower electricity rates," Lucarelli said.

National Transmission Corp. (Transco) president Alan T. Ortiz acknowledged Wallace’s observation. "That is partly true. The initial stages of WESM will be ‘an imperfect WESM’," Ortiz said.

Though believing that achieving the objective of WESM will take a while, Ortiz said there is a need to implement the law. "We have to start somewhere. This is why we are conducting a demonstration market so we can learn from it," Ortiz said.

Ideally, the WESM should be put up before the sale of the generating assets of the National Power Corp. (Napocor).

Under a deregulated environment, electricity will be traded electronically through WESM on an hourly basis.

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.

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