MANILA, Philippines — Stakeholders in the power industry are proposing that the prudential guarantee requirement being imposed on distribution utility-participants for trading at the Wholesale Electricity Spot Market (WESM) be equally enforced to the retail electricity suppliers (RES) under open access regime.

It has been noted that under prevailing rules, there is no specific policy yet if the RES will be required to become WESM members. Once that is set, industry players emphasized that the prudential guarantee requirement must also be clarified, especially on its application to open access and retail competition (OARC) participants.

Before any party can be accepted as WESM participant, it has to go through a registration process first with the market operator (currently the Philippine Electricity Market Corporation); and shall pay the mandated registration fee, plus the prudential guarantee to serve as security deposit.

The prudential guarantee shall cover roughly 85-percent of the volume to be traded by a particular DU or other entities in the spot market. In some jurisdictions, the requirement will generally cover seven days of volume purchases.

When the WESM was established six years ago, prudential guarantee deposits were channeled through Standard Chartered-Banco de Oro, which bagged PEMC’s contract to provide the system for billing and settlements, including electronic fund transfer (EFT) activity, for traded electricity at the spot market. Payments can be posted in the form of cash, standby letter of credit or surety bond.

For the billing and settlements under open access, Energy Secretary Rene D. Almendras hinted that “PEMC will outsource (it) to a bank … the whole settlement operations.”

He did not specify though if the market operator will use its existing facility or it will be auctioned to other banks.

The other preparatory work being sorted out for open access is the enhancement of the WESM’s market management system (MMS) – the information technology-based trading platform for capacities sold at the spot market.

“We are aware that the MMS needs to be updated. So naturally when you update that, you’ll also enhance the same basic elements to run the retail,” the energy chief said.

The government is expecting deluge of spot market participants upon the kick-off of open access, with it eyeing around 800 firms joining the bandwagon. As culled from the energy chief’s assessment, that could be an addition to the existing 80 players in the market.

The energy department is giving the market operator at least five months to finalize the structures and set up the necessary infrastructure to prepare the WESM for the much-anticipated entry of full-blown retail competition in the industry.