Shorter WESM trading interval to start next month – DOE

Published May 24, 2021, 6:00 AM

by Myrna M. Velasco

The Department of Energy has finally approved the long-awaited shorter trading interval for the Wholesale Electricity Spot Market to start next month.

The short trading interval, from one hour to 5 minutes, will go “live” or be in commercial operation starting June 26.

However, the energy department stated its approval for the June 26, 2021 target date of the enhanced WESM design operations (EWDO) is subject to a condition that the Philippine Electricity Market Corporation (PEMC) shall be able to submit “a certification attesting to the market readiness” of the new trading system of the spot market – not just for the integrated Luzon and Visayas markets, but also for Mindanao.

To recall, the government through the DOE, has prescribed that the commercial operation of WESM-Mindanao shall coincide with the timeframe on when the enhanced spot market design shall be fully enforced for the Luzon and Visayas markets.

PEMC is the governing body of the WESM while spot market operation is under the management and direct supervision of the Independent Electricity Market Operator of the Philippines (IEMOP), a spinoff company established in 2018.

“The PEMC shall submit the said certification at least one month prior to the target date,” the DOE stipulated, adding that “upon receipt of the said certification, the DOE shall determine its acceptability and sufficiency,” pursuant to DOE Circular No. DC2017-005-0009, which was previously issued for such undertaking in the WESM.

“If the DOE finds it meritorious, it shall issue another advisory declaring the actual commercial operation date,” the agency’s advisory has emphasized.

The department further instructed “in the event that the DOE does not find the certification acceptable, PEMC and the concerned entities should immediately rectify or remedy the deficiency.”

The agency expounded “once the DOE conforms and approves the rectification and the remedies, it shall determine a new date for the commercial operation of the EWDO.”

In the case of the Mindanao electricity spot market, it was noted that its prevailing interim dispatch protocol “shall automatically be terminated upon the commercial operation of the EWDO,” as provided under a DOE Circular.

The new design for the trading platform of the WESM will expectedly improve efficiencies in the buying and selling of power commodity and will similarly bring the maturity of the deregulated electricity sector to higher notches.

A key feature of the WESM’s new trading system will be the shortened dispatch interval – that was originally from one hour to just five minutes, parallel to practice in more mature jurisdictions, such as Australia.

As recurrently explained by the electricity spot market operator, the inter-hour deviations and imbalances in power trading would be lessened; and it is expected that price outcomes will end up more competitive, hence, beneficial to consumers.

Additionally, the system improvement calls for a “single pricing mechanism as a result of the shortened dispatch interval that will no longer require ex-post runs.” Prior to the changes, WESM pricing had been anchored both on ex-ante (based on forecast) and ex-post (actual trading outcome) pricing schemes.

IEMOP has specified that there would also be “automatic pricing re-runs that will yield to availability of prices in real-time.”

For trading gate closure on price and volume offers, this shall likewise be reduced from one hour to just 30 minutes or less, purportedly to provide trading participants flexibility in managing risks for unplanned events.

And with the planned setting up of the reserve or ancillary services market, co-optimization of resources will be pursued, along with that of energy offers.