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PIA Press Release
2006/10/06

PSALM probe a ‘litmus test’ of spot market

Quezon City (6 October) -- THE investigation into the possible price manipulation by the Power Sector Assets Liabilities (PSALM) is a “litmus test” of whether the wholesale electricity spot market is working, the head of the Philippine Electricity Market Corp. (PEMC), which is conducting the probe said.

But in a separate interview, Energy Secretary Raphael Lotilla said the fact an investigation is being conducted shows the system is working.

"When we allow the process to take its course, there is an opportunity for making a correction should that be the findings," he said.

Lasse Holopainen, PEMC president, said "suspicion(s) of manipulation in prices" came after the average price in the spot market's third month of operation from August 26 to September 25 surged to P4.853 per kilowatt hour (KWh) and even as high as P6.80 per kWh from a weekly average price of P3.62 pesos per kWh.

However, he said they saw no supply and demand factors that could have caused the spike in prices.

"Like in any market we would be conducting investigations,” he said in an interview in Malacañang. “This is only significant because it's investigation number one, so it becomes a litmus test. Does the market work, can it self-regulate? Because otherwise we'll have to find another market."

Participants in the spot market include 30 power plants and 13 distributors, including the Manila Electric Co.

The 24-hour computer-based wholesale market was seen as a key to the sale of the National Power Corp.’s plants because it was meant to free up the supply of electricity on Luzon and partly allay investor concerns about the sector’s profitability.

Lotilla, for his part, said the investigation showed “there is a process for that to rectify any adverse effect that price manipulation may have resulted” and that “rules and procedures are working (and there is) self-policing among the actors.” (PIA) [top]

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