By Myrna M. Velasco
Published: May 20, 2013
On the bid of many offtaker-utilities, the level of prudential requirement (PR) to be put up by those sourcing electricity supply from the Wholesale Electricity Spot Market (WESM) has been reduced to 35 days from the previous 63-day settlement coverage.
Based on the revised rules approved by the Philippine Electricity Market Corporation Board, the lessened prudential requirement will cover 30-day settlement plus five days of contingency.
The prudential requirement serves as a guarantee for suppliers in the WESM that there is a standby fund they can draw from if the electricity purchasers, primarily distribution utilities, cannot meet payments on their supply off-takes from the spot market.
It must be noted that heavily-indebted power utilities, like the Albay Electric Cooperative (ALECO), had been sourcing supply from the WESM without complying to the mandated prudential requirement.
This left power suppliers in the dark as to how they can legally oblige ALECO to settle its debts, given the disparate issues being raised also by the provincial government of Albay.
“The 35-day level of security deposit as prudential requirement shall be implemented after the revisions of the relevant provisions of the WESM rules are effected,” the spot market operator has noted.
The revised rules were adopted by the PEM Board last May 3, but it has been emphasized that such shall only be enforced upon completion of the imposed conditions.
The WESM operator further specified that “while the pertinent changes in the WESM Rules have not been effected, the computation of prudential requirements shall remain at 63 days.”
Primarily, the Board has directed the Rules Change Committee “to reflect the approved reduced level of PR and the new basis of computing the actual and maximum exposure with instruction to further study and revise the pertinent provisions of the WESM Rules.”
It was noted that the monthly assessment of actual exposure “shall be based on preliminary statement or available settlement data.”
Additionally, the annual assessment of maximum exposure “shall be based on the average settlement amount in the last six billing periods, taking into consideration the price spikes and changes in the bilateral contract quantity.” source
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