WESM eases prudential guarantee, dispatch requirements for Mindanao grid

Published July 12, 2021, 2:00 PM

by Myrna M. Velasco

The operator of the Wholesale Electricity Spot Market (WESM) is temporarily enforcing ‘relaxed rules’ – for at least three months, on the prudential requirement (PR) as well as dispatch conformance of trading participants in the Mindanao spot market.

According to Robinson Descanzo, chief operating officer of the Independent Electricity Market Operator of the Philippines (IEMOP), “for the initial operation of WESM (in Mindanao), we relaxed the compliance on dispatch and prudential guarantee.”

The commercially binding price settlements for WESM-Mindanao will start October 26 this year, hence, the easing of the rules are anticipated to stay within July to September.

For the prudential requirement that a spot market-buyer distribution utility (DU) will be posting for its WESM transactions, it was prescribed that the amount shall be equivalent to the actual exposure of that particular utility-offtaker into the spot market.

For the next three months, Descanzo noted that the DUs sourcing their power from WESM-Mindanao “shall just be required to immediately pay their exposure,” but for now, they don’t need to make any deposit for prudential requirement yet.

To illustrate, Descanzo indicated that if a DU has its supply portfolio covered by 95-percent contracts; then the prudential guarantee it will need to put up in the WESM shall just be the corresponding amount it will need for its 5.0-percent exposure in the spot market.

“That’s what we relaxed in the rules for WESM-Mindanao, so we will now just bank on their actual payments during the billing periods,” he emphasized.

On plant dispatch conformance, Edward Olmedo, manager for operations planning and modeling of IEMOP, has stated that there will be “slightly different compliance mechanism” to be temporary enforced for WESM trading participants in Mindanao.

Under prevailing rules for the WESM in Luzon and Visayas grids, generators offering their capacities in the spot market are just allowed dispatch tolerance conformance of 1.5-percent upwards; and 3.0-percent downwards.

“And why do we set that tolerance? Because we don’t want generators to over-deliver since that will also increase the amount that we will be paying them. That is to ensure that they cannot game the market and they won’t also be risking the integrity of the grid,” Olmedo expounded.

And given that Mindanao-WESM is still traversing through its birth pains, Olmedo reiterated that “we slightly deviated from that, so we have a new mechanism for dispatch conformance,” although he qualified that within the prescribed three-month transition, that shall be evaluated if the proposed policy is too strict or too lenient.

“We don’t want to impose immediate penalties if the participants wouldn’t be able to comply. At the same time, we don’t want to be very tolerant also,” he said.

Olmedo added “we really have to discover in actual if that is already appropriate. Then the conformance mechanism we will implement will be used by PEMC (or the Philippine Electricity Market Corporation as the governance body of the WESM) for subjecting generators to investigation.”

 
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