Enhanced Electricity Market for the entire Philippine grid

By Richard J. Nethercott

Through the Department of Energy’s (DoE) Department Circular no. 2021-06-0015, The commercial operations of the Enhanced WESM Design and Operations (EWDO) officially commenced on June 26, 2021, in the Luzon, Visayas, and Mindanao grids. Finally, twenty years (20) after the enactment of the Electric Power Industry Reform Act (EPIRA), the Wholesale Electricity Spot Market (WESM) is now implemented in all the Philippine power grids.

The Independent Electricity Market Operator of the Philippines (IEMOP), through the guidance of the DoE, together with the National Grid Corporation of the Philippines (NGCP), Energy Regulatory Commission (ERC), Philippine Electricity Market Corp. (PEMC), and all WESM members, conceptualized and developed the EWDO to be implemented nationwide. Indeed, this is a testament of the dedication and commitment of all energy industry stakeholders and participants to create a more competitive and transparent energy industry landscape in the country.

The EWDO, which was conceived in 2013, aims to further enhance competition, transparency, and robustness of the Philippine WESM. Indeed, a competitive and transparent market will increase confidence in the spot market and will help attract investments in the different sectors of the power industry.

To provide the rules in determining prices and schedules in the electricity market under the EWDO, ERC promulgated its decision on Dec. 29, 2020 which approved the revised Price Determination Methodology (PDM).

Foremost, the transition to a five-minute dispatch and settlement interval from the previous one-hour interval will significantly improve the demand forecast and mitigate generation imbalances through enhanced mechanisms which will ensure stricter compliance of generators to their dispatch schedules.

On the other hand, customer trading participants will now have a more refined period for their bilateral contracts. The five-minute market will enable them to have greater options and flexibility in fulfilling their demand in very specific periods either through bilateral contracts or the electricity spot market.

Overall, the improved efficiency gained from this transition is expected to eventually benefit ordinary Filipino consumers through more competitive electricity prices for the distribution utilities and those who are already participating as Contestable Customers (CCs) under the Retail Competition and Open Access (RCOA). Additionally, WESM results will provide better price signals for the benefit of stakeholders, participants, investors, and the public.

The establishment of WESM in Mindanao will also benefit Mindanao energy players and their consumers. Since Mindanao currently has an excess amount of power, the operations of WESM will ensure that the most efficient and cheapest power plants are dispatched first to satisfy the grid’s demand. Moreover, when the Mindanao-Visayas Interconnection is completed, the excess power in Mindanao may be sold to Luzon and Visayas. WESM will also provide more efficient scheduling and dispatching processes as well as established settlement procedures in the Mindanao Grid, as laid down in the WESM rules and market manuals.

The implementation of the EWDO is a major technological achievement which has been accomplished by only a few electricity markets in more developed countries. In comparison to most jurisdictions, the Philippine WESM is now more responsive to real-time conditions and minute changes in the grid. Thus, with the EWDO, the Philippine WESM under the operations of IEMOP, will be established as one of the technologically advanced electricity markets in the globe.

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