Wholesale Electricity Spot Market

The EPIRA mandates the establishment of a wholesale electricity spot market (WESM) that provides the mechanism for identifying and setting the price of actual variations from the quantities transacted under contracts between sellers and purchasers of electricity. The WESM became operational in the Luzon Grid on June 26, 2006. It is a "gross pool, net settlements" market which enables suppliers and buyers to trade electricity as a commodity.

Prior to its initial operations, the DOE issued the WESM Rules, which set the guidelines and standards for participation in the market, reflecting accepted economic principles and providing a level playing field to all electric power industry participants. The Rules include procedures for establishing the merit order dispatch for each time (hourly) trading period and determining market-clearing prices. The ERC approved and issued the price determination methodology for the WESM.

The Philippine Electricity Market Corporation (PEMC) acts as the market operator that governs the WESM. Its Board of Directors should be composed of representatives of electric power industry participants and independent members. Its primary purpose is to establish, maintain, operate and govern an efficient, competitive, transparent and reliable market for the wholesale purchase of electricity and ancillary services in the Philippines in accordance with relevant laws, rules and regulations. As envisioned by EPIRA, the present structure of PEMC, one in which the market operator functions are still under the supervision of the PEMC board, will change with the appointment of the Independent Market Operator (IMO).

The IMO is an independent entity tasked to operate and administer the WESM and allocate resources to enable it to operate and administer the market; determine the dispatch schedule of all facilities in accordance with the WESM Rules; monitor daily trading activities in the market; oversee transaction billing and settlement procedures; maintain and publish a register of all WESM Participants.

PEMC is currently undergoing the trial operations program in the Visayas Grid. Results of the Live Dispatch Operations (LDO) in April 2008 registered daily average prices of ~4 – 6 P/kWh. Commercial operations in the Visayas would commence upon approval and declaration by the Department of Energy.