Published
December 24, 2019, 10:00 PM By Myrna M.Velasco
Via its proposed
Circular, the Department of Energy (DOE) is amending the ‘prudential
requirement’ that a trading participant in the Wholesale Electricity Spot
Market (WESM) must post to cover its traded energy in case there shall be
default on payments.
A prudential
requirement takes the form of a “security deposit” that a WESM participant must
post or submit to the operator of the spot market – and this amount must be
called upon in case the trading participant fails in paying its obligations.
As propounded, the WESM
operator – which in this case is the Independent Electricity Market Operator of
the Philippines (IEMOP) – “shall determine the initial prudential requirements
of a new WESM member corresponding to the projected maximum exposure of the new
WESM member.”
This shall be
calculated as “the average of the projected settlement amount of each complete
billing period,” as prescribed in the Market Manual as well as by the WESM
rules.
It has been set forth
that “prior to the end of each financial year, the market operator shall
determine and provide written confirmation to each WESM member of its maximum
exposure to the market operator in respect of a billing period in the following
financial year.”
As stipulated in the
market manual, the amount of security to be provided by each WESM member “shall
be equivalent to the maximum exposure.”
And if there is a
change in the bilateral contract of a WESM member, “the maximum exposure shall
be computed based on the settlement amounts estimated by the market operator
using the average actual market price,” that shall be reckoned on the billing
period of 26th March to 25th September of a particular year.
It has been explained
that “the average actual market price shall refer to the ratio of the total
spot market payment of a WESM member,” which may include spot market energy and
reserve transactions as well as the total metered quantities net of bilateral
contract quantities for each billing month.
To arrive at the amount
of the prudential requirement that a WESM trading participant must comply with,
the spot market member “shall submit to the Market Operator its assumptions for
determining its projected gross ex-post energy settlement quantities.”
The DOE Circular
further stipulated that “the market operator may require the WESM member to
submit supporting documents if necessary.”
IEMOP is similarly
required to assist WESM trading participants “in determining the projected
gross ex-post energy settlement quantities.” Ex-post quantities would refer to
the actual volume of energy that had been traded in the spot market.
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