by Myrna Velasco July
2, 2016 (updated)
The operator of the
country’s Wholesale Electricity Spot Market (WESM) is seriously considering the
establishment of “derivatives market” as added layer of trading enhancements for
the restructured power industry.
As it matures into its
10th year of operations, the WESM had already gone through many setbacks – but
with the power supply situation in the Philippines already stabilizing, the
spot market is now just biding for improvements moving forward.
As recently presented
to the media, officials of the Philippine Electricity Market Corporation (PEMC)
disclosed that they already “formulated the development roadmap and initiated
the conduct of a legal feasibility study” for electricity derivatives market.
The market operator
noted “the development of market design (for derivatives) and implementation
will follow based on the results of the legal feasibility study.”
PEMC President Melinda
L. Ocampo has qualified, however, that this proposed market enhancement is
still at very preliminary stage.
Further studies, PEMC
officials said, will also determine later on what form of derivatives market
will be set in place – if it will just cater to exchange-traded derivatives
such as “options and futures contracts” or it can be set more complicated
to include swaps and forward contracts.
PEMC noted it has been
introducing added features into the spot market in line with the new market
management system (NMMS) or the enhanced electricity trading platform that it
is currently working on.
German firm Siemens AG
is the power spot market’s contractor for this venture that is targeted for
completion next year.
Apart from the
propounded derivatives market, the WESM is also lining up new trading arrangements
that the market could cater to – including planned “financial transmission
rights.”
Such would refer to a
financial instrument that could entitle a holder-entity to receive compensation
for transmission congestion charges when the grid is congested either in the
day-ahead market or if there is a difference in congestion prices in a
day-ahead market arising from the dispatch of plants out of the warranted merit
order.
“Further study on the
subject is ongoing,” Ocampo has noted; while qualifying that this is just one
of the many enhancements that they have been envisioning for the market and to
also help resolve the dilemmas of the country’s power sector.
Additionally, the WESM
operator indicated that it already submitted recently to the Department of Energy
(DOE) its draft Renewable Energy (RE) Certificate Market Rules and Information
Technology (IT) Systems Design.
Ocampo emphasized that
there is an “on-going study on the regulatory framework of the RE Certificates
Market.”
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