Wholesale Electricity Spot Market (WESM)

The Wholesale Electricity Spot Market (WESM) is the central electricity trading platform established under the Electric Power Industry Reform Act (EPIRA, RA 9136) that allows generation companies and large electricity consumers to trade power on a near-real-time basis. IEMOP serves as the Market Operator (MO); the DOE holds final approval authority over market rules [PEP 2023-2050 Vol. II, p.94, 2023].

The DOE’s overarching market vision is “one grid, one market” — a unified national electricity market that supports efficient dispatch, fair competition, and clean energy integration across all three Philippine grids [PEP 2023-2050 Vol. II, p.94, 2023].

Statutory Mandate (Section 30, RA 9136)

EPIRA required DOE to establish the WESM within one year of effectivity (by June 2002). DOE and industry participants jointly formulate the market rules; the price determination methodology is subject to ERC approval [RA 9136, Section 30, 2001].

The market operator was initially constituted as an autonomous group under TRANSCO’s administrative supervision, transferring to an independent entity within one year after WESM launch. This became PEMC at the Luzon WESM launch in 2006, and was replaced by IEMOP in 2018. See Independent Electricity Market Operator of the Philippines (IEMOP) .

ERC may suspend WESM during national or international security emergencies or natural calamities [RA 9136, Section 30, 2001]. NEA was authorised to guarantee EC/small DU purchases in the market; NEA’s authorised capital was increased to PhP15 billion for this purpose.

Operational History

Default Wholesale Supplier Arrangement (2006–2010)

At WESM Luzon’s launch on 26 June 2006, not all electric industry participants — particularly Distribution Utilities — could meet the technical and commercial requirements to trade directly in WESM. DC2006-06-0009 designated NPC and PSALM as Default Wholesale Suppliers (DWS) to supply electricity imbalances for non-WESM-member participants. The arrangement was intended as an interim measure not to exceed one year [DC2010-05-0006, whereas clauses, 2010-05].

By April 2010, PSALM had privatized 87.82% of its Luzon/Visayas generating capacity (3,318.23 MW of 3,778.23 MW) and 68.22% of NPC-IPP contracted capacity (3,345.75 MW of 4,904.55 MW), leaving NPC/PSALM unable to effectively continue as DWS [DC2010-05-0006, whereas clauses, 2010-05].

DC2010-05-0006 (signed by Acting Secretary Jose C. Ibazeta) terminated the DWS arrangement and declared a disconnection policy [DC2010-05-0006, §§1–2, 2010-05]:

• DWS terminated: NPC and PSALM relieved of DWS designation; all related circulars repealed
• Disconnection policy: Any person or entity failing to register with WESM within 90 days from the circular’s effectivity shall be disconnected from the grid (initially Luzon only)
• NGCP authority: Authorized to disconnect non-compliant participants under OATS Rules
• DUs with NPC/PSALM arrearages: May still register but must settle arrearages or enter into restructuring agreements within 90 days; settlement is a condition for reconnection
• Implementation Review Committee (IRC): Created — DOE chairs; composed of DOE, PEMC, PSALM, NPC, TRANSCO, NEA, NGCP — responsible for smooth DWS termination and disconnection policy implementation [DC2010-05-0006, §5, 2010-05]

Trading interval: Five-minute trading interval adopted June 2021 (replacing the one-hour interval) [PEP 2023-2050 Vol. II, p.94, 2023]. DC2021-06-0015 (18 June 2021) provided the operational WCS guidelines for Mindanao generators during the pre-COD period — covering offer/nomination procedures, SO/MO responsibilities, and non-compliance reporting to PEMC’s ECO; settlement during WCS remained based on existing contracts with no WESM financial settlement.

WESM Mindanao Launch

DC2022-12-0039 (23 December 2022) declared commercial operation of WESM Mindanao effective 26 January 2023. At launch, 69 of 101 expected participants had completed registration [DC2022-12-0039, Preamble, 2022-12].

Key provisions [DC2022-12-0039, §§1–9, 2022-12]:

• Prudential Requirements (PR) relaxed for the first 3 billing months; Direct Members unable to post PR by 26 April 2023 must downgrade to Indirect Membership
• Dispatch Conformance Standards (DCS) relaxed for the first 3 billing months; ECO continues monitoring for evaluation
• Separate settlement: Until MVIP energization, Mindanao transactions settled separately from Luzon/Visayas (§7)
• FIT generators: Automatic termination of Renewable Energy Supply Agreements (RESAs) with DUs upon Mindanao WESM COD, per ERC FIT-All Guidelines (§9)
• Pending registrants given extension to 25 April 2023; advisory of 26 April 2023 extended further to 25 June 2023

LASURECO and MAGELCO special arrangements (§8.2): These two Bangsamoro ECs were unable to comply with Direct WESM Member registration requirements. PSALM was designated as their Direct WESM Member Counterparty for a transitional period ending 26 January 2024, with the following terms:

• All LASURECO/MAGELCO energy withdrawals exclusively allocated to Agus 1 and 2 HEPPs (PSALM-owned, Bangsamoro Area)
• Allocated as bilateral contract quantity declared by PSALM; excess Agus output allocated to PSALM’s other customers
• PSALM may determine allocation per billing period based on actual EC payments
• NGCP authorized to identify technical arrangements for exclusive PSALM capacity allocation in the Bangsamoro Area
• PSALM may issue Notice of Disconnection if energy exceeds Agus 1&2 capacity or upon non-payment
• Arrangement ceased 26 January 2024 upon PSALM notice to MO/SO

A further Advisory (11 May 2023) declared Single Settlement for Luzon, Visayas, and Mindanao from the May 2023 billing period, triggered by actual energy flow through MVIP . The integration of Mindanao completes the “one grid, one market” vision — 17 years after the Luzon WESM launch (2006) and 13 years after Visayas (2010) [PDP 2023-2050, Ch.3 Sec.5.1, p.117, 2025].

Market Participants (October 2023)

32 new participants entered the market during the reporting period — 18 ancillary service providers, 11 GenCos, 2 directly connected customers, 1 metering service provider [PEP 2023-2050 Vol. II, Table 47, 2023].

Market Activity (May–October 2023)

• Spot market transactions: Average 1,576.3 GWh/month across Luzon, Visayas, and Mindanao
  • Luzon: 67.0% share
  • Visayas: 21.5% share
  • Mindanao: 11.5% share
• Net Effective Spot Settlement Price (generators): PhP6,408.3 per MWh
• Effective Spot Settlement Price (customers): PhP6,613.8 per MWh
• Generator payments in Luzon declined 12.3% (May PhP8.2B → October PhP7.2B); Visayas declined 22.0% (PhP3.6B → PhP2.8B); Mindanao surged 80.2% (June PhP688M → October PhP1.2B)

[PEP 2023-2050 Vol. II, p.95, 2023]

Reserve Market (RM)

The Reserve Market co-optimizes energy and ancillary service reserves within the WESM dispatch [PEP 2023-2050 Vol. II, pp.97–98, 2023]:

TOP is non-binding — results from trial operations are not used commercially for scheduling, dispatch, settlement, or cost recovery. Commercial operation also requires ERC approval of the Price Determination Methodology (PDM).

Renewable Energy Market (REM)

The REM enables compliance with Renewable Portfolio Standards (RPS) through trading of RE Certificates (RECs). It operates under interim commercial operations per DC2022-06-0019. As of July 2023: 265 participants registered [PEP 2023-2050 Vol. II, p.97, 2023]. See Renewable Energy Market (REM) .

Electricity Derivatives Market (EDM / Contracts for Difference)

An ongoing IEMOP study on Contracts for Difference (CfD) — a mechanism where a buyer pays the seller the difference between the current and contracted value of electricity. Key points [PEP 2023-2050 Vol. II, pp.97–98, 2023]:

• UK model: UK CfD (introduced October 2014) designed to support RE projects >5 MW; generator receives difference between market price and strike price when market is below strike; pays back the difference when above
• Philippines status: PEMC study (2020) found significant legal/regulatory barriers — only banks and insurance companies are currently authorized to deal in over-the-counter derivatives; only equity, interest rate, and currency derivatives are actively traded
• Timeline: Implementation in medium-term (2025-2028)

Capacity Market

The DOE has proposed an Independent Impact Assessment of the costs and benefits of establishing a Philippines Capacity Market — a mechanism to incentivize adequate long-term generation investment beyond the energy market [PEP 2023-2050 Vol. II, p.98, 2023]. No implementation timeline established.

WESM Rules Amendments (2022–2023)

19 DCs covering market rule amendments issued in this period (Table 48), addressing: billing/settlement, penalty framework for test and commissioning, GEOP implementation in retail rules, metering/billing validation, market resource modelling, Mindanao launch, PEM Board governance, reserve market, market operator performance standards, constraint violation coefficients, market operator/system operator procedures, registration/de-registration, dispute resolution, bilateral contracts, WESM design enhancements, information disclosure, and audit/performance monitoring [PEP 2023-2050 Vol. II, Table 48, 2023].

Electricity Market Roadmap