Wholesale Electricity Spot Market

(WESM)
General Overview
 Presentation Outline:

• The WESM Rules

• Regulatory Filings
• The Philippine WESM
 The WESM Rules
• EPIRA mandate
• Section 30
WESM Rules - establishes the basic rules,
requirements and procedures that govern
the operation of the Philippine electricity
market.
A consolidated set of rules covering:
» operation of pool
» metering and settlement
» scheduling/dispatch
» dispute resolution
» rule change process
Chapter 1 – Introduction

• Regulatory framework
• Governance
– PEM Board
– Composition of PEM Board
– Functions
– Working Committees

Spot Market
Division
Chapter 2 – Registration of Members
and Fees
• “WESM Members”:
– Persons who must be authorized by the ERC to
operate in the restructured industry - Network
Service Provider, Ancillary Service Provider,
Suppliers, Generators and Meter Service
Providers
– Others who intend to participate in the industry

Spot Market
Division
Chapter 2 – Registration of Members
and Fees
Market Fees
– Level and structure for ERC approval
– Components of market fees
• Registration fees
• Metering fees
• Billing and settlement fees
• Administration fees
• Other costs incurred by PEM Board and working
groups
Chapter 3 - The Market

Chapter 4 - Metering
Chapter 5 – Market Information
and Confidentiality
Chapter 6 –Intervention and
Market Suspension

Spot Market
Division
Chapter 7 - Enforcement and
Disputes
Chapter 8 - Rule Change

Chapter 9 - Interpretation

Chapter 10 – Transitory Provisions

Spot Market
Division
Regulatory Approvals

• Price Determination Methodology

• Market Fees

• Administered Price Determination

Methodology
Regulatory Approvals

Price Determination Methodology (PDM):

The PDM determines the price of

electricity not covered by bilateral
contracts between sellers and
purchasers of electricity users using the
Market Dispatch Optimization Model
(MDOM).
Regulatory Approvals

Administered Price Determination

Methodology (APDM):

Administered Price - is the price that will

be used by the Market Operator of the
Philippine WESM in the settlements of
energy transactions during periods when
ERC suspends the market or in cases
when System Operator/Market Operator
intervenes in the market.
Regulatory Approvals

APDM:

The price and schedule for a given price

schedule shall be equivalent to the load
weighted average ex-post energy price of
the corresponding trading interval of the
four (4) preceding same days, that have
not been administered.
Regulatory Approvals

The market fees are categorized into:

1. Market Registration Fees – to cover the

expenses for registering WESM members,
which are not included in the calculation of the
total Market Transaction Fees requirement of
PEMC.
2. Market Transaction Fees - the total budgeted
revenue requirements of PEMC in operating
and governing the market.
 How will the WESM be governed?
• Department of Energy (DOE) – supervises the restructuring
of the electricity industry. The Act, mandates DOE,
together with industry participants, to formulate the
detailed rules for the WESM.

• Energy Regulatory Commission (ERC) – approves the Price

Determination Methodology and the Market Fees. It also
sets the criteria for eligibility for membership in the WESM
market and performance standards through the Grid Code.

• Philippine Electricity Market Corporation (PEMC) – the

governing body of the WESM, enforcing and modifying
rules to safeguard the WESM mechanism and its
participants. It manages the system to ensure it meets
standards and targets, registers participants and resolves
their disputes.
Key Players in the WESM
Market Operator (MO)

• Dispatch Scheduler
• Operates the WESM Network Service
System Operator Provider

Customers

Metering Service Ancillary Service

Provider Generators
Provider
Trading Participants

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GOVERNANCE AND REGULATORY
STRUCTURE FOR THE WESM

ERC
DOE
•Enforcement
•Policy making
•Pricing
•Planning
•Market Monitoring

Governance PEM
Auditor

PEM Board Rule Change

Committee

Disputes
Resolution
TRANSCO Administrator
Market Operator
(SO) Market
Surveillance
Market Participants Committee
Technical
Management
Suppliers/ Committee
Generators Distributors End-Users
Aggregators
Administers the operation of the
WESM in accordance with the
WESM Rules
Operate the WESM on a non-
profit basis
Determines the dispatch
schedule of all facilities
Monitor daily the trading
activities in the market
Operate the power system in accordance
with the WESM Rules, Grid Code or any
instruction from the MO or the ERC to ensure
security and reliability of the power system.

Provide central dispatch to all generating

facilities and loads in accordance with the
dispatch schedule submitted by the Market
Operator.
 The Philippine WESM

 A centralized venue for sellers and buyers to trade

electricity as a commodity.

 Wholesale market - it is open to generators,

distribution utilities, directly connected customers, large
customers and eventually supply aggregators with at
least one (1) Mega-Watt (MW) of electricity requirement.

 Spot market - electricity is traded in real time

because it cannot be stored for future use. Electricity is
difficult to store.
WESM
 As envisioned, the WESM will provide an efficient
and transparent venue for trade and investment in
the power industry

 The WESM is aimed to:

 Provide cost-efficient dispatch of power plants

through an economic merit order;

 Create reliable price signals to assist participants in

weighing investment options;

 Provide a fair and level playing field for sellers and

buyers of electricity as prices are driven by market
forces.
The WESM and its Basic Concepts
 Market place for trading
electricity as a commodity that
reflects the market based value of
electricity
• The heart of the
industry structure  Prices not subject to regulation
but governed by market forces.

 Uses the concept of a “gross pool”

where all electricity output
including those not covered by
bilateral contracts, are centrally
coordinated while allowing
generators/consumers to compete
to be scheduled and dispatched to
meet the electricity demand in real
time.
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Locational Marginal Pricing
Cost of supplying next MW of load at a
specific location, considers generation
marginal cost, cost of losses and
transmission congestion cost.

LMP = Generation + Losses + Congestion

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LMP

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LMP

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In sum,

Unconstrained system – the market price is set by one

marginal plant. The price is adjusted for each node to
consider transmission losses, and the resulting value
is the LMP.

Where the system is constrained – the relevant flows of

electricity are affected as the line limitations arising
from the constraint may impede the supply of cheaper
electricity from one area to another.
Economic Dispatch; Supply & Demand

Supply Side
Offer of Genco A Demand Side
Q = 100 MW
P = P500/MWh
P/MWh
Offer of Genco B
Industry Demand:
Q = 250 MW 400 MW
P = P 800/MWh
400

Offer of Genco C
Q = 500 MW 1,500
P = P 1,500/MWh
G
e Market Clearing
Offer of Genco D n
Q = 500 MW 500 c Price is set at
P = P 1,800/MWh o
Genco B P 1,500/MWH.
Genco A C

Offer of Genco E
Q = 300 MW
P = P 9,500/MWh MW
100 250 50

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 Ex ante and Ex post Pricing
Ex- Dispatch Ex-
Ante Target Post
150
100

EX-ANTE EX-ANTE EX-POST EX-POST

QTY (MW) PRICE QTY. (MW) PRICE
(P/MWh) (P/MWh)
MW →

100 50.00 150 60.00

SETTLEMENT EAETA = 100 X 50 = 5,000 EPETA = (150-100) X 60 = 3,000

Hourly Demand Forecast

TOTAL EAETA + EPETA = 5,000.00 + 3,000.00 = 8,000.00
SETTLEMENT

0 1 HOUR Trading Interval → 1

EX-ANTE – Initial loading level at the beginning of the hour

EX-POST – Actual Metered Dispatch
EAETA = Ex-Ante Energy Trading Amount
EPETA = Ex-Post Energy Trading Amount

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