Power spot market in Mindanao hinges on sale of hydro complex

MANILA, Philippines—Industry stakeholders pushing for the wholesale electricity spot market (WESM) in Mindanao may have to wait for the sale of the biggest hydropower complex on the island before they can see this much-awaited mechanism established.

Melinda Ocampo, president of the Philippine Electricity Market Corp. (PEMC), told reporters that based on initial indications, the establishment of WESM Mindanao might be fraught with a number of difficulties, among them the fact that the government has remained the biggest power generation player on the island.

Ocampo explained that the government, through the state-run National Power Corp., has maintained its ownership, and remained in control of the Agus-Pulangi hydropower complex, a huge portion of the power generation business in Mindanao.

With a capacity of more than 700 megawatts, the Agus-Pulangi facilities currently serve over 50 percent of Mindanao’s electricity requirements.

“We need to look for an alternative wherein the private sector cannot claim that government would be competing with them,” Ocampo said.

She, however, did not disclose the options that PEMC was eyeing as these have not been presented to the Department of Energy, the body tasked to establish and declare WESM in Mindanao.

WESM, which is operated by the PEMC, is similar to the Philippine Stock Exchange. But instead of stocks, electricity is the commodity that is traded on the floor. WESM operations in Luzon started in 2006 and started in the Visayas only last December.

Apart from the monopoly problem, Ocampo also said the manner of bidding or trading power in a setting like Mindanao has not been threshed out.

She also sounded off concerns of having less diverse energy sources since Mindanao has been served predominantly by hydropower. This has been unlike the situations in Luzon and Visayas, where electricity has been greatly generated from a number of sources including coal, natural gas, hydro, biomass and geothermal.

The Philippine Independent Power Producers Association (Pippa) has since been urging the government to put in place WESM in Mindanao to help stabilize power supply on the island.

Pippa president Ernesto Pantangco earlier explained that the declaration of commercial operations of WESM this year would help free up excess power from the embedded generators in the island. Estimates for this excess power were earlier placed at around 100 MW.

WESM is seen as crucial in reducing, if not in eliminating, the spate of rotating brownouts in Mindanao as it can provide power generation companies an assured platform where they can sell their electricity to distribution utilities and cooperatives at competitive prices.

“It’s important that you have a market for people to offer capacity—whether they’re takers of those prices or not. What’s important is that you have a mechanism for people to offer what we call unutilized capacity and let the market decide if it will be willing to pay the price,” he had explained.

Pantangco cited the success of the declaration of WESM operations in Visayas last December 2010 as proof that this mechanism can free up excess capacity. WESM Visayas allowed an additional 200 MW to be traded on the spot market.