WESM amending penalty rules on market breaches

Updated September 4, 2019, 10:48 AM By Myrna M. Velasco

https://business.mb.com.ph/2019/09/03/wesm-amending-penalty-rules-on-market-breaches/

Rules on imposition of penalties against trading participants committing breaches in the Wholesale Electricity Spot Market (WESM) are being modified, with the Market Surveillance Committee (MSC) of the spot market aligning its processes with that of the Energy Regulatory Commission.

In the targeted amendments of market rules, the enforcement of penalties by the Enforcement and Compliance Office (ECO) of the WESM is also being clearly delineated.

Nevertheless, the timeline being proposed in the revised Market Rules is not real-time compared to the practices of other markets – instead the Philippine WESM is giving a very long leeway of up to two years.

As proposed in the WESM Rules amendments, it has been stipulated that “an investigation shall be initiated no later than two years from the date of the occurrence of the act or omission constituting probable breach,” adding that “after the lapse of two years, no investigation may be carried out in respect of the said act or omission.”

The WESM had already instigated several headaches for the industry and the Filipino consumers; and in all of those instances, policymakers and regulators had been ineffective in apprehending market violations – to the detriment of the ratepayers.

Other spot markets in power industries overseas could apprehend market breaches the very instance that these are happening; but in the Philippines, despite myriad of investigations being carried out, no party had been penalized or indicted so far.
In the propounded revised WESM Rules, it has been noted that the MSC shall prepare periodic reports on activities of WESM participants in the spot market – which are generally the generation companies (GenCos) trading their capacity in the market as well as the distribution utilities (DUs) sourcing part of their supply portfolio from it.
The MSC has been similarly directed to turn in periodic reports on “apparent or suspected incidents of anti-competitive behavior by any WESM participant,” as well as on “matters concerning the operation of the spot market.”

These reports will in turn be submitted to the Philippine Electricity Market Corporation (PEM) Board that acts as the spot market’s governing body; then to the Department of Energy and the Energy Regulatory Commission.

On the enforcement of penalties by the spot market’s ECO, such must be carried out following an investigation of any reported breach by a market participant – which may be requested by other WESM members or relevant entities such as system operator National Grid Corporation of the Philippines (NGCP) or the ERC.

“The Enforcement and Compliance Office may, motu propio, request the PEM Board to allow or authorize it to investigate if it has reasonable grounds to believe that a particular act or omission by any WESM member, market operator or system operator constitutes a probable breach of market rules or market manuals,” the draft WESM Rules amendments had stated.