WESM operator confident of a smooth start

New Zealand’s Marketplace Co. Pty Ltd. (M-co), the technical consultant for the wholesale electricity spot market (WESM) in the Philippines, is confident the Philippine Electricity Market Corp. (PEMC) will be able to smoothly operate the facility once it starts operations in January 2006.

In an interview with reporters who recently conducted a study tour of the Australia-New Zealand electricity spot market, M-co chief development officer Phil Bradley said: "We are definitely confident that the market operator will be ready by that time."

But Bradley admitted that like any other electricity market, a number of challenges still confront the Philippines in operating the WESM.

"The system has passed the final order after months and years of work. But, of course, we are not working on a perfect market, we have to be ready for some problems that may arise," he said.

One challenge, Bradley said, is the reliability of the country’s transmission and generation systems.

"These important components of the electricity system will definitely have an impact on the performance of the market. Transmission constraints will fundamentally affect electricity trading. Anything that has to do with power supply and demand will be a major challenge," he said.

The M-co executive, however, pointed out that these challenges are part of the process. "There is a process. Rules will have to be changed if they are not working anymore. If it does not work, change it."

Another challenge, especially during the initial stages of the WESM operation, is changing the "culture." "We need to create a culture that is appropriate. The critical task is how to change the old system to a new one and communicate the culture change," Bradley said.

M-co works with industries and governments around the world, developing and operating markets for commodities and services in diverse industries such as electricity, gas, environmental instruments and telecommunications. M-co delivers expertise in every aspect of creating and running a new marketplace -or in reforming and evolving an existing one.

M-co has services in Australia, New Zealand, Singapore, China, Korea, Taiwan, South Africa and the European Union.

In 2004, the National Transmission Corp. (TransCo) approved the awarding of the $8.47-million market management system (MMS) of WESM to ABB Inc.

TransCo also commissioned M-Co as WESM’s market operator (MO) for the trial operations. The WESM started its trial operations in Luzon and Visayas over the past few months.

Republic Act 9136 or the Electric Power Industry Reform Act, which restructures the power sector, mandates the establishment of the WESM.

Once in place, WESM will empower consumers to choose their supplier of electricity with the main goal of purchasing the least cost of power.

The creation of the WESM is expected to result in higher efficiency of service, transparency in the generation charges and in the long term, help reduce power rates. The demo market is intended to assist in the gradual implementation of the final WESM.

The establishment of the WESM is expected to bring down electricity cost by about 40 centavos per kilowatthour.