PEMC clueless on USAID study

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The Philippine Electricity Market Corp. (PEMC), which operates and governs the country’s wholesale electricity spot market (WESM), turns out to be clueless on the study produced by the United States Agency for International Development (USAID) that criticized WESM’s function as a spot market for electricity.

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On Monday, The Manila Times published a column of its Editorial Consultant Rigoberto Tiglao highlighting a study produced by USAID that tackled WESM’s failure to act as a spot market. The study said that the bulk of the electricity transacted in WESM is sold through bilateral contracts, not through a bid-based spot system.

PEMC head Mel Ocampo said in a phone interview that PEMC hasn’t got the report produced by USAID regarding WESM, and could not comment on the matter it unless they receive a copy of the study.

“I can’t disagree nor agree as I don’t have copy of USAID study,” she further said in a text message.

Regarding the interpretation made in Tiglao’s article, which is titled “USAID study: Electricity ‘spot’ market a farce,” Ocampo just said “for accuracy, you can always verify that by visiting our website.”

Established as one of the reforms in the Electric Power Industry Reform Act (Epira) law, the WESM is a commodity market where electricity is traded.

However, as pointed out in the USAID report, WESM is not functioning the way a spot market does because it sells power mostly through bilateral contracts, citing that approximately 90 percent of power purchases from this market are bilateral agreements that specify the amount, price, and date of delivery of power.

“The WESM allows the direct sale of electricity bilaterally between a seller and a buyer [and]the quantity and price are negotiated outside WESM . . . bilateral contracts between buyers and sellers specify quantities and prices of electricity in advance,” the USAID report said.

According to the report, the intention of bilateral contracts is to act as a hedge against spot market price volatility.

For her defense, Ocampo said that assuming that 90 percent of the purchased power is indeed contracted by the distribution utilities, when it comes to the settlement, it will be settled outside and WESM has nothing to do with it.

Energy Secretary Petilla opted not to react on the issue when asked for comments. The Department of Energy was mandated by law to establish WESM.

The detailed study entitled “Challenges in Pricing Electricity Power Services in Selected Asean Countries” was released April 2013 by USAID and was prepared by a team of Filipino and American economists for the Virginia-based US government contractor International Resources Group.

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