Saturday, June 18, 2011

Competitive retail power market in Visayas, Luzon okayed



THE Energy Regulatory Commission (ERC) declared December 26, 2011 as the open access date to mark the start of the full operations of the competitive retail electricity market in Visayas and Luzon.
It added that electricity end-users with an average monthly peak demand of one megawatt for 12 months prior to such date and certified as contestable customers shall have the right to choose their own electricity suppliers.
The ERC issued the decision as docketed in Case#2011-004RM dated June 13, 2011, "considering the full realization of the pre-conditions for open access and retail competition under Section 31 of the Electric Power Industry Reform Act (Epira) and the fulfillment of the vital requirements prescribed by the Commission."
These pre-conditions include the establishment of the Wholesale Electricity Spot Market (WSEM), which started commercial operation in Luzon in 2006 and trial operation in the Visayas Grid last year; approval of unbundled transmission and distribution wheeling charges; initial implementation of the cross subsidy removal scheme; privatization of at least 70 percent of the total capacity of generating assets of the National Power Corporation in Visayas and Luzon; and transfer of the management and control of at least 70% of the total energy output of power plants under contract with Napocor to independent power producer (IPP) administrators.
The ERC also identified two other vital requirements that must be put in place prior to the market commencement: the adequacy and establishment of necessary infrastructures like transmission networks, generation supply and the customer switching system; as well as the promulgation of pertinent rules and regulations governing open access and retail competition.
Generation supply vs expected demand
The ERC explained that maintaining the supply balance is essential to ensure that pricing in the wholesale and retail electricity markets is kept at competitive and reasonable levels since when there is scarcity of supply, "the ability of the generators to exercise their market power dramatically increases, ultimately resulting in excessive retail prices."
It added that as per the 2009-2030 power development plan of the Department of Energy, "it is apparent that the supply conditions are sufficient to sustain the operations of the retail market.”
For the Visayas Grid, ERC said DOE presented a positive outlook with peak demand forecast for 2011 equivalent to 1,448MW, required reserved margin of 339MW and existing dependable capacity set at 1,457MW.
Moreover, the Commission noted the additional capacity from renewable power plants that may be realized upon the implementation of the Feed-in-Tariff (FIT) system and other incentive mechanism for renewable power projects and activities.
Network system adequacy
The ERC's determination of the date of implementation of the open access at the retail level considers the adequacy of transmission networks since contestable customers will be directly affected by changes in market prices should congestion occurs.
"In a competitive electricity market, congestion in the transmission system causes electricity prices to increase because more expensive supply, which does not pass through the congested lines, has to be sourced to meet the demand," it stressed.
Data from the National Grid Corporation of the Philippines (NGCP) showed the implementation of projects to improve transmission capacities of the Luzon and Visayas grids.
In Visayas, these include the Negros Panay interconnection uprating project, which involves the construction of the second circuit 138kV line from Dingle to San Juan and targets to accommodate the supply of power to Panay from power plants in other islands such as the geothermal plants in Negros and Leyte; as well as the Compostela substation expansion project to accommodate more power from Leyte and Luzon to be transferred to the Panay, Negros and Cebu sub-grids during outage or maintenance of transformers; among others.
Customer switching system
This retail market component supported by what ERC dubbed as a business-to-business (B2B) system shall act as an information technology supported hub for all the retail market participants for the purpose of information exchange for switching, billing and settlement purposes.
"The ability to exchange information with ease is essential for competition to thrive," the Commission stressed but decided that with the required substantial capital costs in setting up and maintaining this infrastructure, a simplified info repository for the switching process shall initially be established by and within the ERC as transitory step. (CGC)
Published in the Sun.Star Bacolod newspaper on June 18, 2011.

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