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 TOPIC TITLE 2

GUIDELINES
TRAINING
TRAINING TRAINING MEETING
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 TOPIC TITLE 3

GUIDELINES
TRAINING
QUESTION & MUTE COURSE
ANSWER MICROPHONE COMPLETION
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Feel free to ask questions during If you are not speaking, keep your endeavor to finish the training.
the course of the microphone on mute.
lecture. Questions can also be
queued via Slido.

INFORMATION TRAINING
CONFIDENTIALITY CERTIFICATION
We might cite examples referring A Certificate of Completion will be
to actual transactions, keep this issued to those who are able to
information in confidence. complete the course.
I. INTRODUCTION TO
WESM

27-28 June 2024 | Microsoft Teams

 INTRODUCTION TO WESM 05

OUTLINE

01 WESM ESTABLISHMENT AND LEGAL BASIS

02 MARKET STRUCTURE

03 MEMBERSHIP AND PARTICIPATION IN WESM

04 WESM GUIDING PRINCIPLES

01 WESM ESTABLISHMENT
AND LEGAL BASIS
 Wholesale: Pertains to large quantities / volumes.

WESM
Electricity: Unique commodity being traded.

Spot: Transactions settled are only those that are not covered by contracts.

Market: A venue for buying and selling (trading) electricity.

 WESM OVERVIEW 08

WHAT IS THE WESM?

Centralized venue for trading of large-scale buyers and sellers of

electricity where price is based on the interaction of demand and supply

Established pursuant to Republic Act 9136 or the Electric Power Industry

Reform Act (EPIRA)
 WESM OVERVIEW 09

RA 9136 (EPIRA) Establishment of WESM

Competitive
Generation
Privatization of NPC’s assets

Electric Power Industry Reform Act Regulated

Transmission
 Provides for the restructuring of the Unbundling of Electricity
Rates for Transparency and Distribution
Electric Power Industry

 Privatization of assets of the Opening-up of high-voltage

National Power Corporation (NPC) transmission lines for easy Competitive Retail
access of distributors and Electricity Providers
 Transition to the desired large consumers
competitive structure

Open Access of
distribution lines for End-users
competitive consumers
 EPIRA Section 30
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.

ESTABLISHMENT Not later than one (1) year after the implementation of
the wholesale electricity spot market, an independent

OF WESM AND entity shall be formed and the functions, assets and
liabilities of the market operator shall be transferred to
such entity with the joint endorsement of the DOE and

FORMATION OF the electric power industry participants.

AN IMO EPIRA-IRR Rule 9, Section 6(a)

A Market Operator in accordance with the WESM Rules
shall implement the WESM. Not later than one (1) year
after the implementation of the WESM, an independent
entity, the IMO, shall be formed and the functions,
assets and liabilities of the AGMO shall be transferred
to such entity with the joint endorsement of the DOE
and the Electric Power Industry Participants.
 WESM OVERVIEW 11

MARKET OPERATOR
The MARKET OPERATOR (MO) was created pursuant to Section 30 of the EPIRA which provides for
the establishment of the Wholesale Electricity Spot Market (WESM) by which competitive
market forces would establish generation prices and make costs more transparent.

WESM Rules Clause 1.3.1.1 WESM Rules Clause 1.2.5

Market Operator’s Duties & Responsibilities WESM Objectives

 Administer the operation of the WESM in • A level playing field exists among WESM
accordance with the WESM Rules Participants (Competition)
 Determine the dispatch schedule of all • Prices are governed as far as practicable
facilities in accordance with the WESM Rules. by commercial and market forces
Such schedule shall be submitted to the • Trading of electricity is facilitated among
System Operator WESM Participant within the spot market
 Monitor daily trading activities in the market (Transparency)
 Oversee transaction billing and settlement • Third Parties are granted access to the power
procedures system (Accessibility)
• Efficiency is encouraged
 INDEPENDENT ELECTRICITY MARKET OPERATOR OF THE PHILIPPINES
ROLES AND RESPONSIBILITIES

CENTRAL REGISTRATION BODY

MARKET RETAIL MARKET
TRADING (Luzon & Visayas)
NODE
WHOLESALE ELECTRICITY SPOT MARKET REGISTRATION
CO-OPTIMIZED ENERGY and RESERVE MARKET
(Luzon, Visayas, and Mindanao)

CUSTOMER SWITCHING

GE P
REGISTRATION

Wholesale
DEMAND FORECASTING, Electricity METERING AND SETTLEMENT
PRICING AND SCHEDULING Spot Market

METERING AND SETTLEMENT

 INTRODUCTION TO WESM 013

WESM ESTABLISHMENT

BEFORE 2001 Generation Companies Independent Power Producers

Transmission System Operator • Scheduling

• Pricing
• Dispatch
• Settlement

Distribution Utilities /
Directly-Connected
Customers (DCC)

- regulated Note: Lists of IPPs and DUs are non-exhaustive.

 INTRODUCTION TO WESM 014

WESM ESTABLISHMENT

TRANSITION TO COMPETITIVE REGIME

RA 9136 (EPIRA of 2001) Restructured the industry to separate competitive and regulated monopoly sectors

Privatization create a Open access to Allow consumers

competitive generation transmission and to choose their
sector distribution lines suppliers

WESM
ESTABLISHMENT OF WESM
GENERATION TRANSMISSION DISTRIBUTION SUPPLY

-Contestable Customers-
 INTRODUCTION TO WESM 015

WESM ESTABLISHMENT

AFTER 2001 Generation Companies

• Scheduling
Market Operator • Pricing
• Settlement

Transmission System Operator

• Dispatch

Distribution Utilities / DCCs Retail Electricity Suppliers

- regulated - competitive Note: Lists of GenCos, DUs, and RESs are non-exhaustive.
 WESM FUNDAMENTALS 15

WESM ESTABLISHMENT
IMPLEMENTATION TIMELINE
Central Scheduling of
Energy and Reserves
WESM Enhanced WESM
Integration of
Variable Renewable
Design and
WESM Central
WESM
EPIRA Visayas WESM Energy Resources Scheduling in
EPIRA-IRR Commercial Mindanao
WESM Rules Operations Enhanced WESM GEOP
PEMC Incorporation Design Amendments Commencement
2010
2002-03 2015-16 2021 2023
WESM

2001 2004 / 2013 2018 2022 2024

Electric Power 2006 Retail
Competition and Transition to the Reserve
Industry Reform Act Open Independent WESM Market
WESM Market
(RA 9136) Access for Luzon Market Operator Mindanao
Management
System (MMS) and Visayas (IMO) Commercial
Philippine Grid Code Operations
Project
Luzon WESM
Commercial
Operations
 WESM FUNDAMENTALS 19

LEGAL BASIS

System Operations

• In the EPIRA, the systems operations functions resides in an

entity different from the market operator.

National Grid Corporation of the Philippines (NGCP)

• Private corporation awarded concession to operate and

maintain the Philippine transmission system.

• Serves as Network Service Provider, System Operator and

wholesale Metering Services Provider – all functions
assumed from the National Transmission Corporation.
 WESM FUNDAMENTALS 20

LEGAL BASIS

System Operations

• Shall provide central dispatch of all generation facilities

connected, directly or indirectly, to the transmission system
in accordance with the dispatch schedule submitted by the
market operator, taking into account outstanding bilateral
contracts

EPIRA Sec 9
02 MARKET STRUCTURE
 INTRODUCTION TO WESM 23

MARKET STRUCTURE

WHAT IS WESM?

The wholesale electricity spot market (WESM) is a venue for trading of

electricity as a commodity.
• WESM facilitates the centralized scheduling of all available
capacities including contracted and spot quantities.
• Determining prices of un-contracted quantities (i.e., spot market
transactions)
• Settlement of spot market transactions (billing, payment and
collections)

WESM provides another option for sourcing electricity requirements

or selling capacities, other than through bilateral contracts.
 INTRODUCTION TO WESM 24

MARKET STRUCTURE

PARTICIPATION
• Trading Participants (Generation Companies and Customers)
• Ancillary Service Providers

OPERATIONS/SERVICES
• Market Operator (IEMOP)
• System Operator (NGCP)
• Network Service Provider (NGCP and DUs)
• Metering Services Provider (NGCP)
 INTRODUCTION TO WESM 25

MARKET STRUCTURE

GOVERNANCE AND REGULATION

• PEM Board, WESM Governance Committees and PEMC governance units

• Department of Energy
• Energy Regulatory Commission
 INTRODUCTION TO WESM 26

MARKET STRUCTURE

GOVERNANCE AND REGULATION

Governance
and Market Operations

PEM Audit Committee PEM Board Operating

Agreement
Rules Change Committee
IEMOP Board

Market Surveillance
Market Assessment Group
Committee Functions
Dispute Resolution
Enforcement and Compliance Personnel Market Operator
Administrator

Market Operator Assets

Technical Committee

Generators / Metering Services Providers Suppliers /

A/S Providers Customers
Network Service Providers Aggregators
 INTRODUCTION TO WESM 27

MARKET STRUCTURE

MARKET TRANSACTION FLOWS

ELECTRICITY FLOW

INFORMATION FLOW

MONEY FLOW

WESM
03 MEMBERSHIP AND PARTICIPATION
IN WESM
 INTRODUCTION TO WESM 29

MEMBERSHIP CATEGORIES

Trading Participants
Service Providers

Generation Companies System Operator Customers

Ancillary Service Provider Network Service Provider Ancillary Service Provider

Metering Service Provider • Distribution Utility

• Bulk User / End User
• Suppliers
• Contestable Customer
 INTRODUCTION TO WESM 30

MEMBERSHIP TYPE
Note:
Direct Membership
All spot market transactions
are scheduled, priced and
calculated following the
same methodologies.
WESM
Directly-Connected Distribution
Customer Utility

Indirect Membership

WESM
Directly-Connected Distribution Generation
Customer Utility Company

Direct Member
04 WESM GUIDING PRINCIPLES
 BACKGROUND 32

WHAT ARE THE GUIDING PRINCIPLES OF WESM?

Gross Pool

Locational Marginal Pricing (LMP)

Net Settlement

Energy and Reserve Co-optimization

Demand Side Bidding*

Self-Commitment

*Not yet implemented

 BACKGROUND 33

GUIDING PRINCIPLES
OF WESM

GROSS POOL
All energy is traded through the WESM (i.e., mandatory
market) regardless of whether the trading participant is:
› Fully Contracted
GENERATOR ENERGY OFFER FOR GENERATOR
› Partially Contracted
TRADING FULL CAPACITIES DISPATCH
› Merchant PARTICIPANTS SCHEDULING
 BACKGROUND 34

GUIDING PRINCIPLES
OF WESM

NET SETTLEMENT Spot Quantity

Settled based on
WESM prices
Only Spot Quantities are settled at market price
(i.e., LMP) Total Energy
Generated or Netted out of WESM
Consumed and settled outside
Bilateral
(based on by counterparties
Note: Contract
meter reading) based on their
Spot Quantities are the energy (in MWh) not Quantity
contract price
covered by bilateral contracts between generators
and customers.
 BACKGROUND 35

GUIDING PRINCIPLES
OF WESM
LMP at Market Trading Node
(PhP/kWh)
3.639

As of billing
LOCATIONAL MARGINAL PRICING 3.645 month May, there
(LMP) are 1020 market
3.660
3.670 trading nodes in
Marginal price is computed at each node or
location in the power system to reflect cost of the WESM
transmission line loss or congestion, or both. 3.640

3.908
3.760

LOCATIONAL MARGINAL PRICE =

3.895 3.740
SYSTEM MARGINAL PRICE +
COST OF LOSS + 2.802
COST OF CONGESTION 3.207
4.005
3.208

3.125

3.005
 BACKGROUND 36

GUIDING PRINCIPLES
OF WESM
Reserve With Co-Optimization
Capacities

ENERGY AND RESERVE CO-

OPTIMIZATION* Total
Energy and reserve schedules are jointly determined Capacities
(Energy + Reserve)
under a single solution

Advantages of Co-optimization:
› All available capacities can be seen by the WESM Co-optimization of
› Determination of optimal schedules and prices Energy and Reserve
between energy and reserves with the least Capacities
overall cost
› Mitigate artificial under-generation

*Started on Jan 26, 2024

 BACKGROUND 37

GUIDING PRINCIPLES
OF WESM

(P/MWh)
Bids to Buy

DEMAND SIDE BIDDING

Market
Loads may submit maximum price that Clearing
they are willing to pay. Price

Offers to Sell

(MW)

Dispatch Schedule Unscheduled

**Not being exercised in the market

 BACKGROUND 38

GUIDING PRINCIPLES
OF WESM

SELF-COMMITMENT
Trading participants are responsible for the
management of their technical operations, unit
commitment decisions and other market risks
through submission of offers to the WESM
TRADING
ENERGY OFFER
PARTICIPANT
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