WESM-Mindanao remains a challenge

Updated March 9, 2020, 11:09 AM By Myrna M. Velasco

https://business.mb.com.ph/2020/03/08/wesm-mindanao-remains-a-challenge/

The establishment of the Wholesale Electricity Spot Market (WESM) in Mindanao is still enmeshed with challenges, primarily the swelling indebtedness of some electric cooperatives (ECs) and the massive incursion of embedded generating facilities among distribution utilities in the grid.

Isidro E. Cacho Jr., chief corporate strategy and communications officer of the Independent Electricity Market Operator of the Philippines (IEMOP), said the concern on the embedded generating facilities is still being resolved through a policy intervention of the Department of Energy.

“We are still targeting first half of this year for the commercial operations of WESM-Mindanao, but there are still major challenges that need to be addressed,” he said.

On the embedded generation, he explained that many Mindanao-DUs resorted to tapping modular generating sets (gensets) and even embedded generation like coal and solar plants when the grid was being tormented with rotating brownouts from 2010 to 2015.

Cacho noted if these capacities would be unaccounted for, there would be massive deviation in forecasts for capacity trading in the WESM and could also impact heavily on prices in cases that the embedded facilities will be taken out from the system.

“When we ran and assessed their impact on the market, we’ve seen that there would be huge difference in forecasting and also has implications on the resulting settlement prices,” he stressed.

Cacho expounded that the dilemma lies in the fact that if these embedded generating facilities will experience outages, there’s a tendency that the concerned DU will procure its requirements from the WESM, and that will have a knock-on effect on supply as well as prices in the spot market.

To deal with that, he stated that the DOE already issued a Circular directing the enlistment of embedded facilities – with 5.0-megawatt and up capacities – so they can be included in forecasts for capacity trading in the spot market.
Based on initial data, these embedded facilities are seen having aggregate capacity of 200 to 300 megawatts.

Another major predicament for WESM-Mindanao is the scale of unpaid financial obligations of two power utilities – the Lanao del Sur and Maguindanao electric cooperatives.

To date, the level of debts of these two ECs had already been estimated at ₱11.5 billion.

“We pointed that out with the DOE because that’s beyond our control. That if a spot market has to be opened in Mindanao, how do you account for the consumption of these power utilities beyond their contracts,” Cacho noted.

There had been previous proposals to write-off the debts of the two electric cooperatives, but it might need an act of Congress and the Office of the President to have it addressed.