PSALM faces probe on alleged price manipulation at WESM
The Philippine Star 10/06/2006
The state-run Power Sector Assets and Liabilities Management Corp. (PSALM) faces a possible probe for alleged "price manipulation" at the wholesale electricity spot market (WESM).
In a press conference yesterday, Philippine Electricity Market Corp. (PEMC) president Lasse Holopainen said they would start an investigation on PSALM’s "unusual price bids" during August and September this year.
As a trader in WESM, PSALM accounts for 50 percent of the trading volume. PSALM, created under the Electric Power Industry Reform Act of 2001, administers the independent power producers (IPPs) of the National Power Corp. (Napocor). It has four teams consisting of 16 power plants that have been trading at the WESM.
"Napocor owns 20 percent of the generating capacity and the rest, or about 50 percent, of our total generating capacity is owned by IPPs, which Napocor was previously managing. However, under the WESM, PSALM has been trading the IPPs, and the thing is if you have market power then you can set the prices. Then 50 percent is under control of PSALM," Holopainen noted.
The investigation, which could last up to 45 days, was ordered by the PEMC board when it noticed the rising prices in the WESM over the past months. The probe, Holopainen said, is reflective of PEMC’s thrust to adhere to a transparent market.
"Whenever there are significant changes in price, whether upward or downward, PEMC will closely monitor the operations of the power spot market, conduct investigations if needed, and penalize responsible parties. PEMC’s mandate is to protect the public interest and ensure transparency, reliability and unfair competition in the WESM," the PEMC head said.
When prices in the WESM go beyond certain thresholds, the Market Surveillance Committee (MSC) will automatically conduct a closer scrutiny of the trading behavior as a matter of procedure.
"All I can say is that there is suspicion of manipulation of prices and there will be an investigation," Holopainen said.
He also assured the stakeholders of WESM and the general public that PEMC will always take a proactive stance to safeguard the transparency, reliability and competitive character of the WESM, with the MCS closely monitoring and analyzing the market’s indices and the behavior of its members and participants.
The market is neutral," Holopainen said, when asked if they would penalize PSALM if found violating the WESM market rules even if it is state-run.
He stressed that "the market has the ability to penalize and correct the prices. Ideally, this investigation will be done prior to the price reflected on the consumers’ bill."
"The way it works after the trading it takes another 30 days to be billed to the distribution utility. So if there is manipulation, then the adjustments will hopefully happen before 70 days lapse," he said.
The PEMC official admitted that he was not expecting this kind of investigation. "This is something that we do expect to happen six months into our operations."
PSALM president Nieves Osorio, for her part, said "in the interest of transparency, we welcome the investigation in order to clarify issues raised against our traders."
"Under the WESM rules, any complaint must be investigated by PEMC. As far as we are concerned, PSALM’s electricity trading teams have been trading electricity based on the rules laid out by PEMC," she said.
"Bid prices are influenced by several factors, among them the cost of producing electricity which varies from plant to plant," Osorio said.
The state-run Power Sector Assets and Liabilities Management Corp. (PSALM) faces a possible probe for alleged "price manipulation" at the wholesale electricity spot market (WESM).
In a press conference yesterday, Philippine Electricity Market Corp. (PEMC) president Lasse Holopainen said they would start an investigation on PSALM’s "unusual price bids" during August and September this year.
As a trader in WESM, PSALM accounts for 50 percent of the trading volume. PSALM, created under the Electric Power Industry Reform Act of 2001, administers the independent power producers (IPPs) of the National Power Corp. (Napocor). It has four teams consisting of 16 power plants that have been trading at the WESM.
"Napocor owns 20 percent of the generating capacity and the rest, or about 50 percent, of our total generating capacity is owned by IPPs, which Napocor was previously managing. However, under the WESM, PSALM has been trading the IPPs, and the thing is if you have market power then you can set the prices. Then 50 percent is under control of PSALM," Holopainen noted.
The investigation, which could last up to 45 days, was ordered by the PEMC board when it noticed the rising prices in the WESM over the past months. The probe, Holopainen said, is reflective of PEMC’s thrust to adhere to a transparent market.
"Whenever there are significant changes in price, whether upward or downward, PEMC will closely monitor the operations of the power spot market, conduct investigations if needed, and penalize responsible parties. PEMC’s mandate is to protect the public interest and ensure transparency, reliability and unfair competition in the WESM," the PEMC head said.
When prices in the WESM go beyond certain thresholds, the Market Surveillance Committee (MSC) will automatically conduct a closer scrutiny of the trading behavior as a matter of procedure.
"All I can say is that there is suspicion of manipulation of prices and there will be an investigation," Holopainen said.
He also assured the stakeholders of WESM and the general public that PEMC will always take a proactive stance to safeguard the transparency, reliability and competitive character of the WESM, with the MCS closely monitoring and analyzing the market’s indices and the behavior of its members and participants.
The market is neutral," Holopainen said, when asked if they would penalize PSALM if found violating the WESM market rules even if it is state-run.
He stressed that "the market has the ability to penalize and correct the prices. Ideally, this investigation will be done prior to the price reflected on the consumers’ bill."
"The way it works after the trading it takes another 30 days to be billed to the distribution utility. So if there is manipulation, then the adjustments will hopefully happen before 70 days lapse," he said.
The PEMC official admitted that he was not expecting this kind of investigation. "This is something that we do expect to happen six months into our operations."
PSALM president Nieves Osorio, for her part, said "in the interest of transparency, we welcome the investigation in order to clarify issues raised against our traders."
"Under the WESM rules, any complaint must be investigated by PEMC. As far as we are concerned, PSALM’s electricity trading teams have been trading electricity based on the rules laid out by PEMC," she said.
"Bid prices are influenced by several factors, among them the cost of producing electricity which varies from plant to plant," Osorio said.
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