Voluntary market exchange, the people’s freedom to sell
and supply and freedom to buy and purchase, is among the cornerstones of a free
and dynamic society. When they are not forced to sell to only one or two buyers
or not forced to buy from only one or two sellers, then there is more
competition. As a result, prices are reasonable and affordable and the
consumers benefit from this kind of economic freedom.
In the electricity market, the presence of many power
generation companies, many power plants from various energy sources, many
distribution utilities and organized consumers, is one precondition for having
a competitive and affordable electricity prices. Especially if governments do
not impose lots of taxes, fees, charges and royalties that push electricity
prices upwards.
Many modern economies have their own electricity exchange
markets, similar to their respective stock markets. These are generally
independent organizations or corporations, independent from government.
Here are Asia and Pacific economies which have their own platform for electricity spot markets. (See table)
Here are Asia and Pacific economies which have their own platform for electricity spot markets. (See table)
The Philippines’ Wholesale Electricity Spot Market (WESM), created under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), became operational in June 2006.
The US and Europe have their own respective electricity
market platform too. Examples are the Electric Reliability Council of Texas,
USA, and the European Power Exchange SE owned by the APX Group, covering
Germany, France, Austria, Switzerland and Luxembourg.
In the above table, it is notable that the Philippines
seems to be the odd-man-out because PEMC, supposed to be an independent
organization and corporations, remains to be under the leadership and control
of the Department of Energy (DoE).
Take the case of the Energy Market Co. Pte. Ltd. (EMC) of
Singapore. The Board is composed of seven prominent individuals, none of whom
is from the government, and seems none is from any energy players (covering
generation, transmission, distribution). The Chairman, Wong Meng Meng, is a
topnotch lawyer known more for litigation and arbitration, not in energy
economics or engineering. So it is a clear example of independence from
government and from stakeholders.
During the Senate public hearing last Oct. 8, chaired by
Senator Sergio R. Osmeña III, Chairman of the Committee on Finance
(Subcommittee B), the issue of PEMC governance and WESM administration was
tackled. The eloquent Senator pointed out the following points, among others:
(1) Under EPIRA, PEMC is supposed to last for only one
year and would transition to an independent market operator (IMO).
(2) PEMC has existed for so long (12 years now), they are
now saying, “Now we have experience in operating the grid because we already
practiced for 10 years.”
(3) The Energy Regulatory Commission (ERC) regulates and
has oversight function over PEMC. PEMC does not consider itself a
government-owned and controlled corporation, supposedly independent, but the
Chairperson is the DoE Secretary.
(4) PEMC was created in 2003, and the DoE Secretary is an
over-staying Chairman for 12 years already.
(5) PEMC being a private corporation is not subject to
audits by the Commission on Audit.
(6) PEMC says it is private, independent of government,
then must go to the Chairperson (DoE Secretary) to change rules.
There are several important issues that PEMC and the DOE
seem to violate EPIRA, supposedly the mother of all electricity reforms
including the creation of ERC, Power Sector Assets and Liabilities Management
(PSALM), WESM and IMO.
One, PEMC should have been nonexistent several years ago,
only one year after the creation of WESM (June 2006); meaning PEMC should have
become IMO by June 2007.
Two, the DoE Secretary should be out of PEMC or IMO as
its Chairman. It cannot be really independent of government if the Chair is the
DoE Secretary, which issues a Department Circular, which becomes part of the
rules of PEMC and WESM.
Three, the PSALM, a government corporation with big
presence in power generation in Luzon-Visayas, may have justified presence in
the PEMC and soon IMO board; but the National Power Corp. with minimal presence
in power generation, its presence in the Board looks questionable. There are
huge players in the generation sector that are affected by PEMC and WESM rules
that are not in the board.
Four, if PEMC is dissolved and IMO is created, there are
two issues to settle. (1) IMO is independent of both government and
stakeholders, like Singapore’s EMC, or (2) IMO is independent only of government
but will be composed of stakeholders, like the Philippine Stock Exchange model.
This writer is not a stakeholder, not a consultant of any
of the stakeholders or the government but writes only from a consumer’s
perspective.
Hence, he wishes to repeat and help continue the advocacy
in the sector: (1) reduce or abolish certain energy taxes, fees, permits,
royalties that contribute to expensive electricity, (2) establish fiercer
competition among players and stakeholders, and (3) have the government lay
down and enforce fair rules that apply to all without exception, not add more
layers of costly bureaucracies and regulations.
• • •
Minor erratum in a previous column entitled: “WESM, PEMC
and the search for competitive electricity prices” last Nov. 4. On the PEMC
Board, it said:
“One from the Market Operator, one from the National
Transmission Corp. (now known as the National Grid Corporation of the
Philippines), four from DUs; one from WESM customers including but not limited
to suppliers...”
The National Grid Corporation of the Philippines (NGCP)
wrote saying that: “NGCP is an entity separate from the National Transmission
Corporation (TransCo)... NGCP as System Operator, holds a seat at the PEMC...
holds the concession and franchise to manage and operate the country’s power
transmission assets.”
Thanks for the correction.
Bienvenido S. Oplas, Jr. is the President of Minimal
Government Thinkers Inc., and a Fellow of South East Asia Network for
Development (SEANET). minimalgovernment@gmail.com
--------------
See also:
BWorld 22, WESM, PEMC and search for competitive electricity prices, November 05, 2015
BWorld 25, Feed in tariff means expensive electricity, November 14, 2015
BWorld 28, Economic freedom in Asia, November 28, 2015
BWorld 29, Paris COP's emission cut targets vs. energy needs, December 06, 2015
BWorld 30, Tourism and airport transfer at NAIA, December 09, 2015
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