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REPUBLIC ACT 9136

AN OVERVIEW
This Power Point presentation was prepared by:

Engr. Mel E. Fonollera, FIIEE, PEE 1988 IIEE National President Past Director of the Philippine Electricity Market Corporation (PEMC) Member Technical Committee, PEMBOARD

The Electric Power System

Coal Plant

Hydro Plant

End Users

End Users
Generation Transmission Distribution

THE POWER INDUSTRY STRUCTURE ( EVOLUTION )

Before the imposition of Martial Law, the Generator Sector was composed of Government and Private Corporations.

These were the power plants owned by the National Power Corporation (NPC), Manila Electric Company (MERALCO).

Power Industry Structure

(EVOLUTION)

PD 40 (1972)

NPC GEN

NPC TRANSMISSION

Distribution Utilities

EndUsers

Power Industry Structure

(EVOLUTION)

EO 215/Build Operate Transfer (BOT) LAW (1990s)

NPC GEN NPC TRANSMISSION

Distribution Utilities

EndUsers

IPP GEN

Pre-WESM Industry Structure

NPC

Electric Power Industry Reform Act of 2001 (EPIRA)

Republic Act No. 9136

An act ordaining reforms in the electric power industry, amending for the purpose certain laws and for other purposes

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.

Definition of Terms (Sec. 4)

End-Users any person or entity requiring the supply and delivery of electricity for its own use.

Captive Market electricity end-users who do not have the choice of suppliers of electricity.
Contestable Market electricity end-users who have a choice of suppliers of electricity. Supplier any person or entity authorized by the ERC to sell, broker, market or aggregate electricity to the contestable market end-users Aggregator a person or entity, engaged in consolidating electric power demand of end-users in the contestable market for the purpose of purchasing and reselling electricity on a group basis. Open Access allowing any qualified person or entity the use of transmission and/or distribution system, subject to the payment of transmission and/or distribution wheeling rates duly approved by the ERC.

Restructuring the Electric Power Industry

Sec. 5 - The electric power industry shall be divided into four sectors namely:

Generation Transmission Distribution Supply

Generator Sector (Sec. 6)

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 the EnergyRegulatory Commission (ERC).

Transmission Sector

Sec.7- The transmission of electric power shall be regulated common electricity carrier business subject to the ratemaking powers of the ERC. Sec.9.b- The provision of open and non-discriminatory access to its transmission system to all its electricity users.

Distribution Sector

Sec. 22 - The distribution of electricity to end-users shall be a regulated common carrier business requiring a national franchise.

Sec. 23 A distribution utility shall have the obligation to provide services and connections to its system for any end-user within it franchise therein shall provide open and non-discriminatory access to its distribution system to all users. A distribution utility shall have the obligation to supply electricity in the least cost manner to its Captive Market, subject to the collection of retail rate duly approved by the ERC

Supply Sector (Sec. 29)

The Supply Sector is a business affected with public
interest. Except for distribution utilities and electric cooperatives with respect to their existing franchise areas, all suppliers of electricity to the Contestable Market shall require a license from the ERC.

The prices to be charged by Suppliers for the supply of electricity to the Contestable Market shall not be subject to regulation by the ERC.

Existing Government Agencies

DEPARTMENT OF ENERGY, DOE (Sec. 37)

NATIONAL POWER CORPORATION, NPC (Sec. 47) NATIONAL ELECTRIFICATION

ADMINISTRATION, NEA (Sec. 58)

Creation of New Entities

National Transmission Company (TRANSCO)

Sec.8 - To assume the electrical transmission function of NPC

Sec.9.a To act as System Operator (SO) of the nationwide electric transmission and sub-transmission system, to be transferred to it by NPC;

Creation of New Entities (contd)

Power Sector Assets and Liabilities Management Corp. (PSALM)
Sec 49 - Creation of PSALM, a government-owned and controlled corporation; shall take ownership of all existing NPC generation assets; and including liabilities of IPP contracts Sec 50 To manage the orderly sale, disposition and privatization of NPC assets, IPP contracts with the objective of liquidating all NPC financial obligations and including Sec.21 The Privatization of the National Transmission Co. (TRANSCO) by open competitive bidding through an outright sale or a concession contract.

Creation of New Entities (contd)

Missionary Electrification
Sec 70 The NPC to perform the missionary electrification function through its newly organized unit, the Small Power Utilities Group (SPUG); and shall provide power generation and its associated delivery facilities to areas that are not directly connected to the main transmission system...

Creation of New Entities (contd)

Establishment of WESM
Legal Basis: Section 30 of R. A. 9136

the DOE shall establish a Wholesale Electricity Spot Market (WESM) composed of the wholesale electricity spot market participants.

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WESM The Industry Structure

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MARKET LOCATION
Generators Offers

WESM
Bids

Utilities and Large Users

Market Operator

Offers of generators and bids of utilities and large consumers are submitted through the WESM Market Management System (MMS), via the electronic communication. The MMS is a WEB INTERFACE directly linked to all Market Participants.

MARKET LOCATION

How the WESM works

Trading participants submit to the Market Operator (MO) the hourly Energy (may include operating reserves) Offers and Demand Bids stating the price and quantity of electricity they are willing to trade.

How Competition Works at Supply Side

Supply Side
Offer of Gen E Q = 300 MW P = P 9,500/MWh

Demand Side
P/MWh

Industry Demand:
400 MW
Customer1: 100 MW Customer2: 200 MW Customer3: 100 MW 400 MW

Offer of Gen B Q = 250 MW P = P 1,500/MWh

Offer of Gen D Q = 500 MW P = P 2,500/MWh

2,000 1,500

Offer of Gen C Q = 500 MW P = P 2,000/MWh Offer of Gen A Q = 100 MW P = P 1,000/MWh

1,000

MW 100 250 50 Dispatch Schedules

Dispatch Schedule Implementation

Supply Side
Gen A Schedule 100 MW Gen B Schedule 250 MW

System Operator

Demand Side

DUs
Industrial Customers

Gen C Schedule 50 MW
Gen D Schedule 0 MW Gen E Schedule 0 MW

ECs

Power System
Dispatch Instructions Electricity Flow

Commercial Customers
SUPPLIERS

Residential Customers

Market Clearing Price

P/MWh 400 MW

2,000 1,500 1,000

Market Clearing Price (MCP) is set at P 2,000/MWh

100

250

50

MW

Power System WESM Coverage

Retail Competition & Open Access

Sec 31 upon initial implementation of Open Access, the ERC shall allow all electricity end-users with a monthly average demand of one MW and above to be the Contestable Market, and two years thereafter the demand threshold level will be reduced to 750 KW..

PRE-CONDITIONS:

Sec. 31 of EPIRA Implementation

Establishment of the WESM Approval of the unbundled transmission and distribution wheeling charges Initial implementation of the cross subsidy removal scheme Privatization of at least seventy percent (70%) of the total capacity of generating assets of NPC in Luzon and Visayas Transfer of the management and control of at least seventy percent (70%) of the total energy output of power plants under contract with NPC to the IPP Administrators

DISTRIBUTION SYSTEM
-PRE-WESM RETAIL COMPETITION
SUPPLIERS Contestable Market 1 MW

WIRES & SUPPLY A MONOPOLY BUSINESS OF DISTRIBUTION UTILITIES

WIRES

CAPTIVE MARKET

AGGREGATORS Contestable Market

WIRES

750 KW

CAPTIVE MARKET

Power System Retail Competition Coverage

Levels of Competition
EPIRA Sec. 30 (Wholesale) EPIRA Sec. 31 (Retail)

WESM

Retail Competition and Open Access

GENERATION

TRANSMISSION

DISTRIBUTION

SUPPLY

End of Presentation

Thank You

www.wesm.ph

End of Presentation

Thank You

www.wesm.ph