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PowerPoint Presentation:

WELCOME to the Wholesale Electricity Spot Market (WESM) AN OVERVIEW This Power Point presentation were prepared by: Engr. Mel E. Fonollera, FIIEE, PEE 1988 IIEE National President Independent Director of the Philippine Electricity Market Corporation (PEMC) and the Market Operation Unit of the Philippine Electricity Market Corporation (PEMC)

The R. A. 9136 (EPIRA):

The R. A. 9136 (EPIRA) provides a framework for the restructuring of the Electric Power Industry, Including privatization of the assets of NPC, Transition to the desired competitive structure, and The definition of the responsibilities of the various government agencies and private entities.

Electric Power Industry Restructuring:

Electric Power Industry Restructuring changing the overall structure of the electricity industry involves mainly the separation of the competitive from the monopolistic components of the industry also involves the unbundling of electricity tariffs (or breaking down the cost components of power rates to ensure transparency)

Ultimate Goals of Restructuring:

Ultimate Goals of Restructuring Greater efficiency Reliable and competitively priced electricity Full range of choices for the stakeholders

PowerPoint Presentation:

Competitive generation sector Regulated transmission and distribution sectors Competitive electricity on contestable market Captive Market and Contestable Market GENCOS Unbundling of electricity rates for transparency Opening up of high voltage transmission lines for open access of distributors and bulk/large end users Opening up of distribution lines for Retail Competition The New Structure by Industry Sectors Supply Sector Establishment of WESM

Legal Basis of WESM:

Legal Basis of WESM 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 determining the price of electricity in the Spot Market not covered by Bilateral Contracts between Sellers and Buyers.

PowerPoint Presentation:

WESM PRICE RULES GOVERNANCE OPERATION The WESM electricity pricing is driven by market forces (supply and demand) The setting of the market spot price is covered by a procedure called the Price Determination Methodology (PDM), and subject to ERC approval The WESM Rules to govern the operation of the Spot Market was jointly formulated by DOE and industry participants Rule Change Committee oversees revisions The PEM Board, Phil. Electricity Market Corp. over-sees the WESM. Four sectors of the industry each equi-tably represented in the Board including four Independent Directors. Market Surveillance Committee monitors unfair practices in the market The WESM is operated by technical staff trained in electricity market development and operations Key personnel were former employees of TRANSCO/NPC Market for fair and competitive trading of electricity Aimed at encouraging efficiency of the electricity through competition


The WESM Internet https://www.mmswesm.ph http://www.wesm.ph SELLERS (GenCo’s) BUYERS (Customers) 400 MWh @ PhP 5,500 10 MWh @ any price 100 MWh @ any price 20 MWh @ PhP 7,000

PowerPoint Presentation:

Generators Utilities and Large Users WESM Market Operator Bids Offers MARKET LOCATION

PowerPoint Presentation:

A centralized venue for sellers and buyers to trade electricity as a commodity – for true competition in generation. Spot Market - electricity is traded in Real Time , because electricity is difficult to store in large quantities for future use. WESM THE MARKET Wholesale Market - it is open to generators, distribution utilities, directly connected customers and eventually Suppliers/Aggregators ( licensed by the ERC ). Spot Market – administered by an Independent Market Operator (MO).

How the WESM works:

How the WESM works Trading participants submit to the Market Operator (MO) the hourly Energy Offers and Demand Bids stating the price and quantity of electricity they are willing to trade.

Demand-Supply Balancing:

Demand-Supply Balancing Generation Companies (GenCo) Loads (DU, EC, Bulk Consumers, Suppliers and/or Aggregators) Offers Bids Supply Side Demand Side Price P = = / MWH Schedules Locational Prices Ranking of Generating Plants according to Price Offer

PowerPoint Presentation:

P/MWh MW Supply Side Demand Side Offer of Gen A Q = 100 MW P = P 1,000/MWh Offer of Gen B Q = 250 MW P = P 1,500/MWh Offer of Gen C Q = 500 MW P = P 2,000/MWh 400 MW Offer of Gen D Q = 500 MW P = P 2,500/MWh 1,000 100 A 2,000 50 C Offer of Gen E Q = 300 MW P = P 9,500/MWh Market Clearing Price (System Marginal Price) is set at P 2,000/MWh. 250 B 1,500 Industry Demand: Customer1: 100 MW Customer2: 200 MW Customer3: 100 MW 400 MW Dispatch Schedules How Competition Works at Supply Side

Dispatch Schedule Implementation:

Dispatch Schedule Implementation Supply Side Gen D Schedule 0 MW Gen B Schedule 250 MW Gen A Schedule 100 MW Gen E Schedule 0 MW Gen C Schedule 50 MW Power System Dispatch Instructions Electricity Flow System Operator Demand Side DU’s EC’s SUPPLIERS Commercial Customers Industrial Customers Residential Customers

Market Clearing Price:

Market Clearing Price MW Market Clearing Price is set at P 2,000/MWh P/MWh 100 250 1,000 2,000 400 50 1,500 A B C MW

PowerPoint Presentation:

To summarize:

The Financial Flows Under the WESM:

The Financial Flows Under the WESM Bilateral Contracts Energy Charges Energy Charges Ancillary Service Fees Ancillary Service Fees Utilities and Large Users Generators System Operator (Transco) WESM Market Operator Transmission Charges Transmission Charges

PowerPoint Presentation:

What is MDOM ? Market Dispatch Optimization Model (MDOM) Is a mathematical formula or algorithm (step by step) procedure to determine hourly dispatch schedule, energy price at all trading nodes (locations), and reserve allocation for the trading interval, etc. Is a computer software, one of the subsystem functionalities of the Market Management System (MMS) which is the heart of WESM operation.


THE MDOM AND THE MARKET OPERATOR (MO) Market Operator (MO) matches generator Offers with Demand Bids of customers. It determines dispatch schedule of generators and MCP and volume using the MDOM which takes into account physical conditions of the power system. In general, the MO schedules generators with the lowest offers first. Generators Customers System Operator MDOM Dispatch Schedule Market Clearing Prices (MCP) Market Clearing Volumes (MCV) Output Process Input Offers Bids Status Market Operator

PowerPoint Presentation:

THE MDOM POST-OPTIMIZATION PROCESSES The MO Submits the dispatch ( generator ) schedule to the System Operator (SO) for central dispatch, and publishes MCP & MCV for the Trading Participants. Internet System Operator (SO) Power System Dispatch ( Generator ) Schedule MCP & MCV Dispatch Instructions Trading Participants MARKET OPERATOR

The System Operator (SO) Responsibility:

The System Operator (SO) Responsibility Distribution Utilities Directly Connected End-users TransCo High-Voltage Transmission GENERATION TRANSMISSION DISTRIBUTION SUPPLIERS / AGGREGATORS END-USERS Electricity Flows Electricity Flows Electricity Flows Electricity Flows Electricity Flows Electricity Flows Industrial Customers Commercial Customers Residential Customers SYSTEM OPERATOR

How the MMS works …:

How the MMS works … Trading Participant (TP) Market Operator (MO) System Operator (SO) Power Market Power System Dispatch Instructions : Dispatch targets Revenue Meters: Metered values Market Clearing Results : MCPs and MCVs System Demand : Energy demand Reserve requirements System Condition : Outages/contingencies Transmission limits Money flows : (EFT) * Charges and Payments Market Management System (MMS) Market Input Data : Energy offers and bids Reserve offers * EFT – Electronic Fund Transfer

PowerPoint Presentation:

EFT INTERFACE AMONG , MMS, MARKET PARTICIPANTS (MP) AND THE MPs BANKS RELATIVE TO FUNDS TRANSFER MO sends payment Instructions to EFT via MMS to settle account to seller. EFT provides transaction records of funds transfer to MMS Buyer instructs its bank to remit funds to EFT. Generator instructs its bank to remit funds to cover market fees. EFT transmits funds To Genco’s bank based on MO’s instruction. Distributor’s bank transmits funds to MO’s EFT Facility Debit and Credit Amounts entered By EFT bank. Genco bills MO for energy sold. MO sends billing to MP (buyer) for: Energy purchased Market fees. MO bills Genco (seller) for Market fees. Sends transaction summary For energy sold. Genco Bank remits Payment for market Fees. Market Operator Generator/Seller Customer/Buyer EFT Facility Generator’s Bank Customer’s Bank

PowerPoint Presentation:

Who are the WESM Trading Participants? NPC Owned Generation Facilities= 121 (11361 MW) Non-NPC IPP = 22 (1901 MW) Directly Connected Customers = 90 (1273 MW) Suppliers/ Aggregators = ? Electric Cooperatives = 119 (2494 MW) Distribution Companies = 16 (4930 MW) The declaration of Open Access and Retail Competition by the ERC, Suppliers and Aggregators will compete in the supply of electricity for the Contestable Market End-Users with average peak demand of one MW and above, and two years thereafter the threshold level is reduced to 750 KW……….

PowerPoint Presentation:

Levels of Competition GENERATION SUPPLY TRANSMISSION DISTRIBUTION WESM Retail Competition and Open Access EPIRA Sec. 30 (Wholesale) EPIRA Sec. 31 (Retail)


GOVERNANCE AND REGULATORY S TRUCTURE Oversight Regulation ERC Enforcement Pricing DOE Policy making Planning Rule Change Committee PEM Auditor Disputes Committee Technical Committee Market Surveillance Committee PEMC Board Governance Network Service Providers (Transco & DUs) Generators/ A/S Providers WESM Members End-Users Suppliers/ Aggregators Market Operator Market Assessment Group Enforcement and Compliance WESM

Seasonal Demand Variations:

Seasonal Demand Variations 4000 4500 5000 5500 6000 6500 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 151 161 171 181 191 201 211 221 231 241 251 261 271 281 291 301 311 321 331 341 351 361 Day MW

Important Things to Note::

Important Things to Note: Generating Plants will compete with each other to supply electricity to the Power System Electricity Prices will vary depending on: Time, Day, Week, Month, Season Location Power Market and System Conditions Choice for Buyers: Bilateral Contracts WESM

Electricity Market Experience:

Electricity Market Experience Countries that have developed successful wholesale electricity markets include: Australia Canada Chile, Brazil, Peru and Argentina New Zealand Denmark, Finland, Sweden, and Norway England and Wales USA Singapore Others

Final Notes::

Final Notes: WESM OBJECTIVES To establish a competitive, efficient, transparent and reliable market for electricity; where: * A level playing field exists among WESM participants. * Trading of electricity is facilitated among WESM participants within the Spot Market * Third parties are granted access to the Power System * Prices are governed as far as practicable by commercial and market forces * Efficiency is encouraged.

End of Presentation:

End of Presentation Thank You www.wesm.ph

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