Electricity market seen opening in June
Saturday, April 22, 2006
The country’s wholesale electricity spot market, which analysts see as key to the successful sale of state-owned power plants, is likely to open in June, the operator of the trading system said on Friday.
Investors are skeptical whether Manila's plans to attract investment through a freed-up power market will work, and to date, private investment has been mostly in Power Purchase Agreements (PPAs) -- where the companies have guaranteed returns.
Lasse Holopainen, president of the Philippine Electricity Market Corp., said he hoped regulators would finish hearings on the pricing mechanisms for the automated wholesale electricity spot market (WESM) on May 11.
The Energy Regulatory Commission (ERC) must approve the fee that will be charged by WESM and the administered price in rare cases when the market failed to operate due to natural causes such as typhoons, he said.
"May 11 is the last of all those hearing dates and the expectation is we will start sometime in the first two weeks of June," Holopainen told Reuters at the WESM headquarters in Manila's Ortigas business district.
Analysts and officials have said the biggest stumbling block to the sale of dozens of power plants of state-owned National Power Corp. (NAPOCOR) was the delay in the opening of the WESM.
They say investor interest has been dampened by a lack of supply contracts with distributors, regulatory uncertainty, an interfering judiciary and a strong environmental lobby.
The Philippines failed to sell any power plants last year due to political instability and investor doubts about profitability in the local energy sector.
Delays
Manila had aimed to sell 70 percent of the rated capacity of some 31 National Power plants by the end of 2005. The plants, with rated capacity of 4,335 megawatts, account for about a third of total Philippine generating capacity.
Manila sold six power plants in 2004, or just 11 percent of the targeted generating capacity for sale.It plans to sell 10 plants this year, with the first auction of a 600-megawatt plant on April 27, in what is seen as a test of investor confidence in the economy.
National Power aims to raise $4-5 billion from the sale of its plants and by leasing its electricity grid to cut its debts, which are equivalent to about a third of the country's gross domestic product.
Holopainen said the WESM, which will allow buyers and sellers to trade electricity round the clock by matching computer-based bids and offers, had been due to open in January.
But his firm decided to refile its proposed pricing formula with the ERC after the Supreme Court last year upheld a ruling by the Court of Appeals stopping Manila Electric Co. (MERALCO) from raising its rates.
The Court of Appeals said energy regulators had acted without proper consultation in granting a rate hike to MERALCO, the country's largest power distributor.
Holopainen said the opening of the WESM would lead the way to the successful restructuring of the energy sector and the privatization of National Power.
Under a law passed in 2001, power distributors are required to source at least 10 percent of their electricity requirements from the spot market.
"These are not baby steps. This is a giant leap," Holopainen said. "All of a sudden, you are going into full competition and complete transparency. That's exactly what we need." Reuters
posted by philpower @ 9:09 AM,
