Pricing Methodologies Ready for WESM - ERC
“The Energy Regulatory Commission (ERC) approved the Philippine Electricity Market Corporation’s (PEMC) applications on the Price Determination Methodology (PDM), the Administered Price Determination Methodology (APDM) and the Market Fees making things ready for the Philippine Wholesale Electricity Spot Market (WESM),” the ERC Chairman Rodolfo B. Albano, Jr. said.
The ERC’s timely approval hurdled the WESM’s launching set on June 23, 2006. The pricing structure of electricity in the normal operation of the spot-market trading will be catered by PDM while APDM will be adopted during market suspension. Market fees, on the other hand, will cover the costs of administering and operating the WESM.
The ERC, in its 69-page Decision, approved the PDM subject to periodic compliances consistent with its authority pertaining to evaluation and approval of applications filed before it. The significant modifications were adopted to address concerns on the accuracy of the resulting prices and the impact on long-term incentives of the market participants. The ERC likewise laid down its concerns on the current market structure vis-à-vis operations of the WESM.
As for the APDM, the ERC directed PEMC to utilize an administered price mechanism similar to that implemented by the Ontario Electricity Market. ERC has resolved that the administered price should be independently determined using a methodology that promotes transparency and certainty.
ERC approved PEMC’s proposal to categorize the market fees into: (1) Market Registration Fees (the ”Registration Fee”); and (2) Market Transaction Fees (the ”Transaction Fee”). The Registration Fee is to be levied upon all the trading participants and is intended to cover the costs of registration and training of WESM members while the Transaction Fee is intended to defray the operating and capital expenditures of PEMC. The Transaction Fee will not be charged to customers in the WESM but will only be allocated among the generators/sellers participating in the WESM, based on the trading participant’s kWh gross metered energy transactions in the market, both for spot market transaction and declared bilateral contract quantities.
“The
success of the WESM largely lies on the proper implementation of the rules and
prices that the ERC has judiciously set,” Chairman Albano emphasized.
June 27, 2006