Learning from Developing Country Power Market Experiences: The Case of Philippines

- Regularly collect and process market monitoring data and indices; and

- Prepare periodic assessment reports on overall market performance and competitiveness.

The MAG issues monthly and annual reports assessing the market. The market assessment reports comprise figures and analyses of outages, spot prices and traded quantities, concentration and structural indices (such as HHI, Price‐Setting Frequency, Pivotal Supply and Residual Supply Index), among others. However, the reports fall short of analyzing bidding behavior (beyond identifying generation offer patterns) and assessing market outcomes, particularly whether or not these outcomes are deemed to be competitive.<sup>11</sup> The Market Surveillance Committee does analyze events of unusual spot prices detected by the MAG, but again their annual reports fall short of more in‐depth and comprehensive analyses of market outcomes.

# 4.1.3 Oversight, market intervention and dispute resolution

## _4.1.3.1 Rule‐based market intervention_

There have been interventions of the market during natural calamities or international / national security emergencies, based on explicit provisions laid out in market rules. There are no publicly known instances of distortion of the system or market operation by political pressures or other criteria unrelated to reliability standards and economic efficiency. Market rules establish the conditions for market intervention and suspension, during which market‐based prices are replaced by an administered price cap set by the Market Operator, to be used as basis for settlements.

## _4.1.3.2 Regulatory oversight_

The regulator (Energy Regulatory Commission, ERC) is responsible for the oversight of the Philippine wholesale market. The ERC has the primary jurisdiction to impose the rules and regulations of the electricity spot market and to investigate and act against any participant or player in the electricity industry for violations of any law, rule or regulation governing the same, including the rules on cross‐ ownership, anti‐competitive behavior, abuse of market positions, must‐offer rule of the pool, and other similar or related acts. In compliance with its responsibility under the EPIRA, the ERC promulgated in August 2006 competition rules and complaint procedures (ADB, 2016). The Philippine Competition Commission, a new anti‐trust agency, was created by law in 2017. The Commission oversees mergers and acquisitions and has primary responsibility to investigate and rule on market competition, including uncompetitive behavior.

Enforcement is targeted towards two types of breach that are believed to have the most impact on efficiency of the market and its ability to achieve its objectives, namely compliance with offer rule and with dispatch schedules, and dispatch tolerance by scheduled generating units. Deterrence of breach is anticipated to be achieved through regular monitoring of compliance and immediate initiation of investigations for probable breach; and imposition of stiff financial penalties (ADB, 2016). ERC has

> 11 See for example market monitoring reports for PJM (http://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2018/2018q1-som-pjm.pdf) and CAISO (http://www.caiso.com/Documents/2017FourthQuarterReport-MarketIssues-PerformanceFebruary2018.pdf), which focus on the performance and competitiveness of the markets (energy, capacity, etc.).

20