Higher fees for WESM even without prior ERC approval pushed

By Myrna M. Velasco – October 5, 2021, 3:25 PM
from Manila Bulletin

On fears that the Wholesale Electricity Spot Market (WESM) will be operating with financial deficit, its governance body Philippine Electricity Market Corporation (PEMC) is seeking higher market fees to be implemented to trading participants starting this month – even without prior regulatory approval.

In a very urgent motion lodged with the Energy Regulatory Commission (ERC), the WESM governing entity stipulated that unless it will impose higher market fees (calculated on base year 2018), the operation of the WESM “will incur additional deficit.”

The regulatory filing of PEMC further indicated that “it will have to start billing the applied rate for 2018 beginning this month of October 2021.”

The proposed timeline of implementation, however, has been raising questions to trading participants – primarily if PEMC is targeting to raise the market fees even without first securing the approval of the ERC.

The WESM governance body qualified that on a month-to-month basis, it will just “file a monthly report on its collection and expenses to demonstrate to the Honorable Commission that this decision of PEMC is based on its operational necessity and to ensure its financial viability and survival.”

The company said it is still collecting market fees anchored on base year 2017 – and the aggregate amount being paid by WESM trading participants hover at P486.441 million. Hence, the calculated deficit could be as much as P335.766 million.

As culled from PEMC’s application for adjusted market fees, the firm is targeting to fetch from trading participants P620.735 million, higher than the current 2017 base of its collection at P486.441 million.

The applicant-firm highlighted that its current scale of market fees “is grossly deficient to enable PEMC and Independent Electricity Market Operator of the Philippines (IEMOP) to efficiently perform their respective functions as the governance arm and market operator of the WESM.”

Should its plea for higher market fees not be immediately approved, PEMC added that such would “severely compromise the continuing operations of the WESM given the need to support its budget requirements and considering that the cost of operating the WESM is expected to increase over time.”

PEMC argued that “the need to address this predicament becomes more pronounced for the current year in view of the numerous policy and regulatory issuances that have since been promulgated to implement market developments, albeit without certainty of funding.”

It noted that “the initial months following the commercial operation of the Enhanced WESM Design and Operations (EWDO) revealed the need for enhancements to the market systems which necessarily requires adequate budget support.”

The EWDO for the spot market, which predominantly featured the WESM participant’s shift to a five-minute market trading interval, was implemented in June this year.