Tuesday, February 28, 2017

PEMC flags electric cooperatives’ financial capacity for spot market

Posted on February 22, 2017

DAVAO CITY -- The financial capacity of electric cooperatives remains the biggest concern in the planned opening of the wholesale electricity spot market (WESM) in Mindanao, according to the head of the Philippine Electricity Market Corp. (PEMC).

Melinda L. Ocampo, president of PEMC, the governance arm of WESM, said in a news conference here yesterday that the government must ensure that there is “discipline among electric cooperatives.”

“We are asking the government to ensure that there is a policy (on cooperatives participating in the WESM),” said Ms. Ocampo, noting that payments in the spot market are usually one of the main burdens in implementation.

Energy Undersecretary Felix William B. Fuentebella, in the same news conference organized by the Department of Energy (DoE), admitted that there are power generators that have yet to be paid by cooperatives for transactions under the short-lived interim Mindanao electricity market (IMEM) that was set up in late 2013.

“Some companies who joined the market have yet to get paid,” said Mr. Fuentebella.

The DoE official said the National Electricity Administration (NEA) will have to strengthen its monitoring of electric cooperatives, noting that NEA is “mandated to ensure that they comply with the policies.”

Under the draft guidelines on the Mindanao WESM, NEA is mandated to offer assistance, both technical and financial, to electric cooperatives, particularly those that will find themselves in difficulty adjusting to the market.

Another issue related to the WESM is the fate of the Agus and Pulangi hydropower complexes, currently still government-owned under the National Power Corp.-Power Sector Assets and Liabilities Management Co., and whether or not the output from these facilities will be included in the spot market.

“We are still studying this major issue,” said Energy Undersecretary Redentor E. Delola.

The Electric Power Industry Reform Act of 2001 mandates the privatization of all government assets and the two hydro plants, which used to be the main power sources in Mindanao, are the only remaining facilities under public ownership.

There were several proposals filed in Congress to keep these assets under government ownership through the creation of the Mindanao Power Corp., but all remain pending.

In the meantime, Mr. Fuentebella said rolling out the WESM with the available excess supply would be beneficial to Mindanao in terms of attracting more investment.

“The suppliers are saying we have more supply,” he said, “This will even result in new industry players and new customers.”

The DoE said Mindanao had surplus generating capacity of 782 megawatts (MW) in 2016 and an additional 1,208 MW is expected this year with the commercial operation of new coal-fired power plants.

PEMC Market Development and Studies Assistant Manager Jonathan B. dela Vina, in a presentation at the forum, said the price cap in the Mindanao WESM would still be P32 per kilowatt-hour, same as in the IMEM.

Based on the draft guidelines, the PEMC will start the trial operation of the spot market on Feb. 26, with market participants joining by March 24. The WESM launch is planned for June 26.

Members of the local business sector, meanwhile, stressed that the government should ensure that consumers understand the impact of the spot market on them.

“At the end of the day, the end-consumers should feel that the market is helping them by way of reduced amounts in their [electric] bills,” said Antonio F. dela Cruz, chair of the Davao City Chamber of Commerce and Industry, Inc.

The Mindanao Power Monitoring Council (MPMC), a multi-sectoral body created about five years ago when the southern island started to have supply deficiencies, welcomed the development as this would provide competition among suppliers.

“[The WESM] should provide consumers with better power rates as suppliers will compete with one another to sign a contract with the distributors,” said MPMC Chair Vicente T. Lao, who is also head of the Mindanao Business Council.

Assistant Secretary Romeo M. Montenegro, deputy executive director of the Mindanao Development Authority, said the market is necessary because “with the Mindanao economy growing, we need to find ways to address the growing needs of power as well as the growing supply.”

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