PSALM official sees open access by third quarter next year

MANILA, Philippines – The anticipated implementation of open access in the electric power industry will be realized by the third quarter of 2011, a top energy official said.

Power Sector Assets and Liabilities Management Corp. (PSALM) president and CEO Emmanuel Ledesma said they expect to complete the privatization of the National Power Corp. (Napocor) contracts in the first half of next year, paving the way for open access, which will allow bulk power users to choose where to source their power requirements.

The privatization of Napocor’s assets is currently on hold pending a thorough review by PSALM, necessitated by the entry of a new administration.

Under the Electric Power Industry Reform Act (EPIRA), open access would only kick in if the government, through PSALM, would be able to sell 70 percent of Napocor’s contracted capacities.

Ledesma said they only need just two percent more to be able to proceed with open access.

Energy Secretary Jose Rene Almendras earlier admitted that they have deferred that sale of the remaining contracts of Napocor due to some unresolved issues in privatization.

The energy chief said he would want the management of the wholesale electricity spot market (WESM) to be transferred to an independent market operator (IMO) first before implementing open access.

“We need to set up many things. There are many improvements that need to be put in place first. After the IMO, I have to make sure market surveillance and all security mechanisms that will be in place,” he said.

He said he expects all preparations for open access to be ready middle of next year.

“First of all, it’s the Energy Regulatory Commission (ERC) that has to declare open access so I’m hoping by the middle of next year, we will start making recommendations to that effect. I am assuming that by the middle of next year, we wil have already put in place all the other infrastructure that is needed,” Almendras said.

He said he is optimistic the IMO would be set in place in the first quarter of 2011.

“I need to push for the IMO by the first two months next year so that I will push the subsequent structures that will happen,” he said.

At present, WESM is run by the government through the Philippine Electricity Market Corp. (PEMC). It provides a mechanism for buying and selling electricity, whether these transactions are covered or not by bilateral contracts.

Earlier, industry players had criticized the lack of initiative from the government to adopt the IMO scheme.

The EPIRA mandates the appointment of an IMO a year after WESM’s implementation. The WESM was formed and became operational in 2007.

Pending the appointment of an IMO, an autonomous group market operator (AGMO) serves as WESM’s interim market operator. At present, the board of the PEMC also acts as the AGMO. But eventually, all the assets and liabilities, as well as functions of the AGMO, will be transferred to the IMO under a competitive bidding process.

Under the law, the IMO should hold the financial and technical capability to run WESM. The IMO must also have a proven track record of not less than two years as a leading market operator of a similar- or larger-sized electricity market.

Almendras said they are awaiting the result of a study being conducted by the Asian Development Bank on the adoption of IMO in the WESM.

“The ADB actually has a grant that is funding a consultancy group that is going to advise us how to execute that IMO as best as possible,” he said. –Donnabelle L. Gatdula (The Philippine Star)