Energy dept issues interim criteria on intervention of WESM operation

Business Mirror

08 Jan 2014 

 

Written by Lenie Lectura

THE Department of Energy (DOE) has released an interim criteria by which the Philippine Electricity Market Corp. (PEMC) can suspend the operation of the Wholesale Electricity Spot Market (WESM).

Department Circular D2014-01-0001, or Adopting an Interim Criteria for the Declaration of Market Intervention in the Wholesale Electricity Spot Market, states that the PEMC has the option to declare market intervention in the WESM, provided that “the trigger for the declaration of market intervention exists when there is supply emergency where electricity supply capacity shortfall is measured at 4 percent or below the total demand.”

Further, “that the 4-percent trigger shall continue to be applied until the DOE determines, through the National Transmission Corp., the National Grid Corp. of the Philippines and the Grid Management Committee, that a new trigger is applicable.”

This move, explained the DOE, is meant to temper unusual price spikes in the WESM. “In light of recent events, the DOE saw the need to provide for an interim measure for the market operator’s declaration of market intervention in order to ensure utmost consumer protection, especially in times of critical supply of electricity that triggers high WESM prices.”

Earlier, the Energy Regulatory Commission (ERC) has moved to protect consumers from a sudden spike in power rates by lowering the WESM market price cap to P0.32 per kilowatt-hour (kWh).

From the offer price ceiling of P62 per kWh, this will be adjusted to P0.32 per kWh. This means that power producers can sell their excess capacity not higher than P0.32 per kWh.

The WESM, which is driven by supply and demand, acts as the trading floor of electricity. Distribution firms such as the Manila Electric Co. (Meralco) sometimes sources power from the WESM when demand is higher than what it has previously contracted with power producers.

The adjustment to the WESM offer price cap was stated under Joint Resolution 2 signed on December 27 by Energy Secretary Carlos Jericho Petilla, ERC Chairman Zenaida Ducut and PEMC President Melinda Ocampo.

“The offer price ceiling of P62 per kWh as set in the WESM Tripartite Joint Resolution 2 is hereby reduced to a new level of P0.32 per kWh. This new level is based on the recently promulgated offer cap set by the WESM Tripartite Committee for the commercial operation of the Interim Mindanao Electricity Market,” stated the resolution.

The offer price cap is, however, temporary pending further review and evaluation of the committee, which is composed of the DOE, ERC and WESM operator PEMC.  “This new offer price cap is interim in nature…. The ceiling set shall be in effect until the issuance of a new price cap not later than 90 days from the issuance of this joint resolution.”

On December 13 the committee convened to discuss possible adjustments to the offer price ceiling, prompted by the rate hike earlier announced by Meralco.

“During the Malampaya turnaround, the observed market-clearing prices were reaching the maximum offer price cap of P0.62 per kWh more often than usual, and even during off-peak hours when demand for electricity is low,” said the committee.

It added, “The resulting high market prices may translate to considerable increase in the distribution utilities’ generation charges that will be passed on to the electricity  consumers, depending on the level of bilateral contracts and/or exposure in the WESM.”   source