WESM Mindanao to start operations in Q2–IEMOP

By Lenie Lectura January 4, 2021
https://businessmirror.com.ph/2021/01/04/wesm-mindanao-to-start-operations-in-q2-iemop/

The Wholesale Electricity Spot Market (WESM) in Mindanao is finally pushing through within the second quarter of the year following the approval of a new price determination methodology (PDM) by the Energy Regulatory Commission (ERC).

“The approval will definitely finalize the Go Live date for the Luzon, Visayas and Mindanao WESM. With the approval of the PDM, definitely the final timeline can now be set. The target timeline is second quarter of 2021,” said Isidro Cacho, the chief corporate strategy and communications officer of the Independent Electricity Market Operator of the Philippines (IEMOP) in a text message.

IEMOP is the operator of WESM.

Cacho said the final date would be discussed this week with the power industry stakeholders, including the Department of Energy.

Last week, the ERC approved with modification, the Philippine Electricity Market Corp.’s (PEMC) application for a new PDM for the WESM.

“The new PDM provides amended features with regard to price determination and settlement in the WESM and consolidated the various pricing mechanisms which are currently contained in several issuances of the Commission,” said ERC Chairperson and CEO Agnes VST Devanadera.

The new PDM will also be used for the upcoming commercial operations of WESM in Mindanao, said the ERC.

The WESM in the Mindanao Grid was launched in June 2017. Back then, IEMOP was expecting the commercial operation to commence in December 2020. But improvements in the software system must take place before the WESM in Mindanao and the launch of the upgraded WESM design takes place.

The WESM is the country’s trading floor of electricity. It is a centralized venue for buyers and sellers to trade electricity as a commodity, where prices are based on actual use (demand) and availability (supply). WESM started commercial operations in the Luzon grid in June 2006 and in December of 2010 in the Visayas grid.

The adoption of the enhanced WESM design and operations provides, among others, a shorter dispatch interval of 5 minutes which will result in better pricing signals as it instantly reflects the changes in supply and demand, and potentially reduce the requirement for frequency regulation reserve which is beneficial to consumers.

“Projecting possible conditions in the next 5 minutes will result in a more accurate picture of the actual conditions as compared to projecting the possible market conditions in the next one hour.

Since regulating reserves are needed to address the fluctuations in supply and demand, lesser fluctuation brought about by better projection would mean lesser requirements for regulating reserve. Also, considering that customers pay for the procurement of regulating reserve, this would translate to lower costs for the customers,” Devanadera added.

The key features of the enhanced WESM design include shortening of scheduling and pricing intervals from 1 hour to 5 minutes; adoption of ex-ante only pricing; automatic re-runs when prices reflect constraint violations to provide timely disclosure of settlement-ready prices; and hour-ahead projections, in addition to the week-ahead and day-ahead projections, to facilitate commitment decisions of trading participants.