Visayas electricity sells for P25/kwh on spot market


Just three days after the Wholesale Electricity Spot Market (WESM) in the Visayas got underway, the “spot rate” of power reached an astronomical P25 per kilowatt hour (kwh) during mid-day trading as demand peaked, quickly drawing a sharp reaction from a party-list congressman representing the rural energy sector that his “worst fears are happening.”

Rep. Salvador “Kiting” Cabaluna III of the 1-CARE party list said it didn’t take long for the “spot market” to manifest the “structural defects” he had warned about when he sought the deferment of the WESM implementation three months ago.

“We saw this coming, but the Department of Energy brushed aside our objections,” Cabaluna said. “The situation is not ripe for the spot market scheme because key elements such as excess power supply and firm supply contracts for distribution utilities are not in place.”

The WESM was established as part of the reforms for the power industry under RA 9136. It seeks to create a “spot market” for excess, or uncontracted generated electricity, to give distribution utilities a choice in buying their power supply and bring about a more efficient power industry.

The law mandates electricity distributors to buy at least 10% of their requirements from the spot market during the first 5 years of the scheme.

Cabaluna said Visayas power utilities are not ready to take part in a WESM scheme because many have not firmed up their bilateral supply contracts with independent power producers (IPPs).

“This leaves these distribution utilities, particularly electric cooperatives, highly vulnerable to the volatile nature of the market,” he said.

The scheme works on the law on supply and demand, he pointed out. When demand is high, and supply is short, then the tendency of prices is to go up, he said.

This is what happened on Dec. 29, he added. At 3 o’ clock of the same day, the spot market rate slid to P15.04 per kwh, which, he said, is still “precipitously high” as far as ordinary consumers are concerned.

Cabaluna said he will monitor the spot market closely to validate his observations.

When Congress resumes session next month, he will reiterate a resolution he had filed three months ago seeking a legislative inquiry into the implementation of the WESM for the Visayas.

About Manuel "Boy" Mejorada
Manuel "Boy" Mejorada is a journalist and social media activist. A former Iloilo provincial administrator, he is now waging a crusade against corruption and narco-politics.

7 Responses to Visayas electricity sells for P25/kwh on spot market

  1. James “Nick” Nichols, a Bukidnon-based energy business consultant (@asianenergy @nicknich3) reacted on Twitter that I should look at the spot market price at 2 o’ clock a.m. It had gone down to P2/kwh or less, he said. If he tells me that we can buy at 2 o’ clock a.m. to our hearts’ delight and just store the electricity just like water, then we’d be happy about WESM.

  2. Nick Nichols says:

    Manuel – I’m trying to understand your position. Are you suggesting that WESM should not exist in the Visayas? Or are you just suggesting that it should be delayed to a later date?

    If you’re suggesting that it be delayed, what do you feel needs to be put in place prior to implementing the market?

    A real-time spot market seems essential to the market structure envisioned by EPIRA. Are you advocating that we not implement that structure? If not, what structure should we move toward?

  3. The position of 1-CARE party list Rep. Salvador “Kiting” Cabaluna III, and most of the electric cooperatives, is that WESM isn’t really a bad idea, but that the timing is not right for its implementation. A fundamental reason is that most ECs have no bilateral contracts as yet after their existing contracts with National Power Corp. ended this month. They need more time to negotiate their supply contracts with IPPs. Right now, the two new coal-fired power plants in the Visayas grid have not gone fully operational.
    WESM was supposed to have been implemented in 2002 but had to be postponed because of the same circumstances as today. At the time, ECs even had “live” contracts with NPC, but the scheme was not put into effect. If we had waited several years, why not wait another six to 12 months to allow ECs to firm up their supply contracts. We don’t want to throw ECs into a sea full of sharks.

  4. Interestingly, the Department of Energy had repeatedly put off the implementation of the WESM for the Visayas for the same reasons cited by Rep. Cabaluna — inadequate power supply and bilateral contracts not yet in place. Then Secretary Angelo Reyes saw that a situation like this would only spell doom for the spot market scheme. Why DoE went ahead with the implementation earlier in the week with virtually unchanged conditions remains a mystery. Rep. Cabaluna expressed some doubts that it happened after the Aboitiz-owned Visayas Electric Co. (VECO) in Cebu signed a bilateral contract with Global Business Power Corp. which operates a coal plant in Toledo, Cebu.

  5. Nick Nichols says:

    Boy – Good points. And the question of “why now” (as opposed to six months from now or whatever) is very valid. I don’t have the answer.

    • I don’t want to pursue “conspiracy” theories but the big players may have a hand in this. The timing is crucial. The Aboitiz-owned VECO had already bagged a power supply agreement with Global Business Power Corp. This leaves several diesel-fired plants also owned by the Aboitiz group free to join the spot market where they can sell electricity at a big profit. The problem with the Visayas is that most of the power that is going into the spot market come from petroleum-fueld plants. The entry of three coal-fired plants should stabilize the supply situation, but the Iloilo plant is still completing its testing and commissioning. The KEPCO plant in Cebu, as I understand it, is not yet operational. The ideal situation is that the DUs will draw the bulk of their requirements from coal plants, and the diesel plants will be just for peaking.

  6. Melinda Ocampo, president of the Philippine Electricity Market Corp. (PEMC), told reporters she will look into the issues raised by stakeholders (meaning Rep. Salvador Cabaluna’s lonely crusade against the poor timing of WESM implementation) this week. Here’s the link to the BusinessWorld Online story:

    http://www.bworldonline.com/main/content.php?id=23839

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