Finally, the government, through the Independent Electricity Market Operator of the Philippines, will start operating the wholesale electricity spot market (WESM), after so many years of postponement.
The goal of the market is to provide a venue for the electricity industry, both the generators and the distributors, to either sell or buy supply, respectively. Just like the regular public market, the goal, aside from becoming the venue for industry transactions, is to provide the end-users with affordable rates.
The goal of the market is similar to the goal in the implementation of the Downstream Oil Deregulation Law, a law which was supposed to break the monopoly in the oil industry. Despite the oil deregulation law, there have been accusations that market cartel has continued to exist.
In the case of the WESM, the industry being among the most regulated sectors, government regulatory bodies claim that it would serve its purpose in bringing down rates. In Luzon where it was first implemented, however, there were still accusations that there were times when industry players manipulated it, although there was still no proof that this really took place.
In the case of Mindanao, the big problem is that some distribution utilities, particularly the electric cooperatives (ECs), have contracted supplies more than what their franchise areas could absorb. Although the market will allow them to sell their excess, the problem is whether this will be bought considering that buyers, supposedly, will look for cheaper electricity.
Another challenge is that many distribution utilities, do not have the expertise in relation to the intricacies in the operations of the market. The fear is that the market might only push them to become inefficient.
One must remember that some distribution utilities, again the ECs particularly, have incurred huge debts for failing to pay the obligations to generators. Although they may claim that this was caused by circumstances rather than mismanagement, many of them cannot support this justification.
It would have been better for government to first review the standings of these ECs and come up with interventions that would make them better. The market might only become another pretext in justifying their incompetence.