Module 1-WESM Fundamentals

Module 1:
WESM Fundamentals
1
Philippine Electricity Market Corporation (PEMC)
Copyright 2011 by Philippine Electricity Market Corporation
Topic Outline
WESM Fundamentals
Establishment of the WESM
Features of the WESM
WESM Structure
Membership and Participation in the WESM

Electricity Industry
Generation
3
Electric Power Industry Structure

MONOPOLY (Pre-EPIRA)
IPPs
NPC
GenCo
NPC
GenCo
IPPs
NPC
DU
EC
Direct
Customers
DU
Generation NPC,
IPPs (IPPs - wholesale
contract with NPC and
some distribution
companies)
Transmission NPC
Distribution and
supply distribution
utilities, electric
cooperatives, NPC
4
Electric Power Industry Structure

NEW STRUCTURE - EPIRA
IPP
IPP
IPP
IPP
WESM
Transmission
DU
Supplier
Direct
Customers
S
O
EC
Competitive generation
Regulated transmission
and distribution
Open access to high
voltage wires
Open access to
distribution networks
Wholesale electricity
spot market (WESM)
Competitive retail
5
market

New Industry Structure

Generation
Competitive; privatized
Transmission
Regulated; privatized
Includes systems operations functions
Distribution
Regulated; privately-owned & electric cooperatives
Retail/Supply
Competitive
6
Features of Electricity
Electricity cannot be economically stored in large
quantities.
All electricity has to be generated when needed.
Demand for electricity over the day is highly variable.
Electricity takes the path of least resistance.

Physical flow of electricity cannot be traced. Thus, it is
not physically possible to determine or even direct
where the electricity generated by one power plant
goes.
Sally Hunt: Making Competition Work in Electricity (2002)
7
Features of Electricity
Transmission of power over the network is
subject to a complex series of physical
interactions.
What happens in one part of the system affects
conditions elsewhere in the system. Ancillary services
are necessary to ensure system reliability and
security.
Electricity travels at the speed of light.

Each second, output has to be precisely matched to
use. Electricity being generated at any given time
equals actual demand and transmission losses.
Sally Hunt: Making Competition Work in Electricity (2002)8
Implications
Scheduling of electricity generation to

meet actual demand is done centrally in
order to ensure stability and security of
the power system.
There is a need for short-term (i.e., dayahead,

on-the-day
or
real
time)
coordination between generation and
transmission.
9
Implementation: Timeline
Electric
Power
Industry
Reform Act
(EPIRA)
(RA 9136)
EPIRA
Implementin
g Rules and
Regulation
(IRR)
Philippine
Electricity
Market
Corporation
(PEMC)
(Nov. 18, 2003)
(June 2001)
WESM
Market
Management
System
(MMS)
Project
WESM
Trial
Operations
Program
Luzon
WESM
Commercial
Operations
Visayas
WESM
Commercial
Operations
(June 26,
2006)
(Dec. 26,
2010)
(March 2004)
Philippine
Grid Code
WESM
Rules
(December
2001)
(June 2002)
2001
2002
2003
2004
2005
2006
2010
10
Topic Outline
WESM Fundamentals
WESM Structure
11

Legal Basis WESM Establishment

EPIRA Sec. 30: Wholesale Electricity Spot Market (WESM)
Within one (1) year from the effectivity of this Act,

the DOE shall establish a wholesale electricity spot
market composed of the wholesale electricity spot
market participants.
The market shall provide the mechanism for
identifying and setting the price of actual variations
from the quantities transacted under contracts
between sellers and purchasers of electricity.
12
Legal Basis-WESM Establishment

Section 30, RA 9136
Said rules shall provide, among others, procedures for:
Establishing the merit order dispatch instructions for each time

period
Determining the market clearing price for each time period;
Administering the market
Prescribing guidelines for the market operation in system
emergencies; and
Amending the rules.
The wholesale electricity spot market shall be implemented by a
market operator in accordance with the wholesale electricity spot
market rules.
13
Legal Basis-WESM Establishment

Section 30, RA 9136 (Electric Power Industry Reform Act of 2001 or
EPIRA)
Subject to the compliance with membership criteria, all generating

companies, distribution utilities, suppliers, bulk consumers/end
users and other similar entities authorized by the ERC shall be
eligible to become members of the wholesale electricity spot
market.
The cost of administering and operating the wholesale electricity

spot market shall be recovered by the market operator through a
charge imposed on all market members: Provided: That such
charge shall be filed with and approved by the ERC.
14
Legal Basis-Related Provisions

TRANSMISSION
Section 9 (e), RA 9136
Subject to technical constraints, the grid operator of the TRANSCO

shall provide central dispatch of all generation facilities connected,
directly or indirectly, to the transmission system in accordance with
the dispatch schedule submitted by the market operator, taking
into account outstanding bilateral contracts
Section 21, RA 9136 Transco privatization
The buyer/concessionaire shall be responsible for the

improvement, expansion, operation and/or maintenance of its
transmission assets and the operation of any related business.
15
Legal Basis-Related Provisions

GENERATION
Section 6, RA 9136
Generation of electric power, a business affected with

public interest, shall be competitive and open.
Upon implementation of retail competition and open

access, the prices charged by a generation company
for the supply of electricity shall not be subject to
regulation by ERC except as otherwise provided in this
Act.
16
Legal Basis - Summary
Provides mechanisms and rules for:

Pricing of electricity not covered by bilateral power supply
contracts
Determining centralized merit order dispatch instructions to all
generation facilities, to be implemented by the grid/system
operator
Composed of wholesale electricity spot market

participants, incl. generation companies, distribution
companies, suppliers, bulk end users/consumers, &
other similar entities authorized by the ERC
Administered in accordance with market rules
Administered by a market operator
17
Topic Outline
WESM Fundamentals
WESM Structure
18

General Features
WESM as a venue for trading of electricity
Centralized scheduling generation and supply of
electricity, including those covered by supply contracts
Determining prices of un-contracted quantities (i.e.,

spot market transactions)
Settlement of spot market transactions (billing,

payment and collections)
19
General Features
WESM is a real-time energy market.
Generation schedules to meet customer demand or

requirements for each hour of the day are determined
an hour ahead.
WESM is a mandatory market.
All persons or entities connected to the grid are

required to become members of the WESM. Failure to
register is a ground for disconnection from the grid.
20
General Features
WESM operates in Luzon and Visayas.
Commercial operations commenced in Luzon on 26

June 2006 and in the Visayas on 26 December 2010.
WESM operates as a single market, and this is possible

as the grids are connected through the Leyte-Luzon
HVDC link.
21
Philippine Transmission System
Luzon: 230 kiloVolt and 500 kiloVolt

backbone transmission System
-Leyte-Cebu AC submarine cable link

-(2x200 MW)
- Negros-Panay AC submarine cable link

-(100 MW)
-Cebu-Negros AC submarine cable link

-(2x100 MW)
Leyte-Luzon HVDC link:

Interconnects Luzon and Visayas
Transmission System
Visayas:
-138 kiloVolt and 230 kiloVolt (Cebu
Only)
backbone transmission System
-Leyte-Bohol AC submarine cable
link (100 MW)
Mindanao:
138 kiloVolt and 230 kiloVolt
backbone transmission
System
22
General Features
WESM is administered by the
Philippine Electricity Market
Corporation (PEMC).
23
Topic Outline
WESM Fundamentals
WESM Structure
24

Market Structure
Participation
Trading Participants (Generation Companies & Customers)

Ancillary Service Providers
Operations/Services
Market Operator (PEMC)

Systems Operator (NGCP)
Network Service Provider (NGCP and Dus)
Metering Services Provider (NGCP)
Governance and Regulation
PEM Board, WESM Governance Committees and PEMC

governance units
Department of Energy
Energy Regulatory Commission
25
Operations/Services
Serves as autonomous group market operator of the WESM

Board of Directors serves as the Philippine Electricity Market
Board. Board is chaired by the Philippine Energy Secretary and
is composed of representatives from the power industry sectors
and independent members.
National Grid Corporation of the Philippines (NGCP)
Private corporation awarded concession to operate and

maintain the Philippine transmission system.
Serves as Network Service Provider, System Operator and
wholesale Metering Services Provider all functions assumed
from the National Transmission Corporation.
26
Governance
Philippine Electricity Market Board
WESM Governance Committees
Rules Change
Market Surveillance
Technical
PEM Auditor
Dispute Resolution
PEMC Units
Market Assessment Group

Enforcement and Compliance Office
27
Policy and Regulation

Department of Energy (DOE)
Policy making and planning

Promulgation of the WESM Rules and its amendments
DOE Secretary serves as the Chairman of the Philippine
Electricity Market Board
Energy Regulatory Commission
Pricing
Competition
Enforcement of the WESM Rules
Licensing/authorization of market participants
28
Market Structure
Oversight Regulation
DOE
ERC
WESM Establishment
Policy making
Planning
Enforcement
Pricing
Competition
Self-Governance &
Operations
PEM Board
PEM
Auditor
Rule Change
Committee
Dispute
Resolution
Market
Surveillance
Committee
PEMC Internal
Market
Operator
Market
Assessment
Group
Enforcement and
Compliance
Technical
Committee
WESM Members
Generators/
A/S Providers
Network Service Providers

(NGCP & DUs)
Suppliers/
Aggregators
Customers
29
Transmission
Market Operator
Customers
Generation Companies
Market Structure - Transactions
System Operator
Metering Services
Provider
Electricity flows
Information flows
Money flows 30
Market Documents Structure

With WESM members and trading participants
WESM Rules
WESM Price Determination Methodology and other ERC-approved

pricing and settlement methodologies
Market manuals
Market Participation Agreement

With System Operator
Philippine Grid Code
WESM Rules
WESM Dispatch Protocol; System Security and Reliability Guidelines,

Management of Must Run Units, Emergency Procedures
Other market manuals

With Metering Services Provider
WESM Rules
WESM Manual: Metering Standards
Other market manuals

31
Topic Outline
WESM Fundamentals
WESM Structure
32

Membership Categories
Trading Participants
Customers (Distribution Utilities, Bulk Users, Suppliers or
Aggregators)
Service Providers
System Operator
Network Service Providers
Metering Services Providers
Ancillary Services Providers
33
Participation
Trading Participants
Customers (Distribution Utilities, Bulk Users, Suppliers or
Aggregators)
Ancillary Service Providers (only upon commencement of

reserve market)
Customers (Interruptible Load)
34
Participation
Direct Members
Transacts (sells or buys) in the WESM directly

Compliant with technical and commercial requirements and
membership criteria
Indirect Members
Transacts in the WESM through a Direct WESM Member (i.e.,

counterparty)
Compliant with technical requirement and membership criteria,
but commercial obligations are assumed by its Direct Member
counterparty.
35
Participation
Spot market transactions of Direct and Indirect

members are scheduled, priced and calculated
following the same methodologies and procedures.
Transactions of Indirect Members are billed to and

paid for by their nominated Direct Member
counterparties.
Most Indirect Members are customers and their

counterparties may be a generator or
aggregator/supplier.
36
Membership Criteria &

Requirements
Criteria
Resident in or permanently established in the Philippines

Not under external administration (e.g., liquidation,
rehabilitation)
Not immune from suit; can sue and be sued in the Philippines
Satisfies prudential requirements
Requirements
Technical: remote terminal unit, WESM-compliant revenue

metering facilities, communication facilities (phone, fax, email
and internet connection)
Legal: with licenses or franchises (e.g., Certificate of
Compliance for generators); corporate and business
registration
37
Registration Process
Application
Submission of requirements
Evaluation by PEMC
Approval/disapproval of application
If disapproved, report to ERC and DOE; applicant may submit

dispute to the WESM Dispute Resolution Administrator.
Post-registration changes
Continuing compliance with registration requirements and criteria
Ensure regular renewal of Certificates of Compliance or
franchises.
Post registration changes that must be notified to PEMC
Change in registered capacities (Pmax, Pmin, ramp rates)

subject to approval
Changes in contact persons
List of power supply contract customers/counterparties

38
THANK YOU VERY MUCH
39

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Module 1:

Philippine Electricity Market Corporation (PEMC)

Electric Power Industry Structure

Electric Power Industry Structure

Philippine Electricity Market Corporation (PEMC)

New Industry Structure

Electricity takes the path of least resistance.

Electricity travels at the speed of light.

Scheduling of electricity generation to

There is a need for short-term (i.e., dayahead,

Philippine Electricity Market Corporation (PEMC)

Legal Basis WESM Establishment

Within one (1) year from the effectivity of this Act,

Legal Basis-WESM Establishment

Establishing the merit order dispatch instructions for each time

Legal Basis-WESM Establishment

Subject to the compliance with membership criteria, all generating

The cost of administering and operating the wholesale electricity

Legal Basis-Related Provisions

Subject to technical constraints, the grid operator of the TRANSCO

Section 21, RA 9136 Transco privatization

The buyer/concessionaire shall be responsible for the

Legal Basis-Related Provisions

Generation of electric power, a business affected with

Upon implementation of retail competition and open

Legal Basis - Summary

Provides mechanisms and rules for:

Composed of wholesale electricity spot market

Philippine Electricity Market Corporation (PEMC)

Determining prices of un-contracted quantities (i.e.,

Settlement of spot market transactions (billing,

Generation schedules to meet customer demand or

All persons or entities connected to the grid are

Commercial operations commenced in Luzon on 26

WESM operates as a single market, and this is possible

Philippine Transmission System

Luzon: 230 kiloVolt and 500 kiloVolt

-Leyte-Cebu AC submarine cable link

- Negros-Panay AC submarine cable link

-Cebu-Negros AC submarine cable link

Leyte-Luzon HVDC link:

Philippine Electricity Market Corporation (PEMC)

Trading Participants (Generation Companies & Customers)

Market Operator (PEMC)

Governance and Regulation

PEM Board, WESM Governance Committees and PEMC

Serves as autonomous group market operator of the WESM

National Grid Corporation of the Philippines (NGCP)

Private corporation awarded concession to operate and

Market Assessment Group

Policy and Regulation

Policy making and planning

Energy Regulatory Commission

Network Service Providers

Market Structure - Transactions

Market Documents Structure

WESM Price Determination Methodology and other ERC-approved

Market Participation Agreement

Philippine Grid Code

WESM Dispatch Protocol; System Security and Reliability Guidelines,

Other market manuals

WESM Manual: Metering Standards

Other market manuals

Philippine Electricity Market Corporation (PEMC)