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(File Photo: BusinessMirror)
(File Photo: BusinessMirror)

ERC suspending WESM during grid red alert

(PE2 Note: BusinessMirror's Lenie Lectura and Samuel Medenilla report on PE2's recommendation to intensify planning efforts toward reducing or shifthing the 3.3 GW peak demand caused by rising temperatures.)

THE Energy Regulatory Commission (ERC) has moved to protect consumers from the spike in power rates by suspending the operations of the Wholesale Electricity Spot Market (WESM) in Luzon and Visayas whenever the red alert notice is issued by the system operator.

President Ferdinand R. Marcos Jr. promptly hailed the decision. “This aims to stop the rise in electricity rates during the calamity caused by El Niño,” the chief executive said in his speech during the Labor Day celebration in Malacañang.

He said the measure is part of government interventions to keep steady the price of basic goods and services amid the ongoing economic impact of El Niño.  The President noted the high temperatures brought about by El Niño have caused a surge in power consumption.

During market suspension, the ERC said the so-called Administered Price shall apply, or if a dispatch interval is subject to both a price mitigation, such as the Secondary Price Cap (SCP), and the Administered Price, the lower of the two prices shall apply in the settlement of transactions for such interval.

Administered Price is imposed by the WESM operator on trading participants during market suspension. Meanwhile, the SCP of P6.245 per kilowatt hour is in effect whenever the P9-per-kWh rolling average price over three days at the electricity spot market has been breached. The cap is meant to protect the public and prevent the repetition of excessive and unreasonable high market prices.

A red alert status is issued by the National Grid Corporation of the Philippines (NGCP) when power supply cannot meet consumer demand and the transmission grid’s regulating requirement.

The first red alert for Luzon grid this year was issued last April 16. As of April 25, the Luzon grid had been placed on red alert for 20 hours and 46 minutes’ and on yellow alert for 57 hours and 50 minutes.

A yellow alert is issued when the operating margin is insufficient to meet the transmission grid’s contingency requirement.

The Visayas grid was not spared from the issuance of red and yellow alerts. From January up to April 25, the red alert was in effect for 24 hours and 14 minutes. The Visayas grid was also placed on yellow alert for 46 hours and forty minutes.

Profiteering risk

LAST Tuesday, ERC suspended the operation of the WESM since it can be used by the unscrupulous power producers to engage in profiteering during the crisis.

The WESM is the venue for trading electricity as a commodity operated by the Independent Electricity Market Operator of the Philippines (IEMOP), which shows real-time power supply and demand in the country.

WESM prices have risen in the last two weeks, when the Luzon and Visayas power grids were placed under yellow and red alerts status due to lower power supply.   

ERC will lift the suspension once “regional capacity, less actual regional demand, reaches above zero for 24 hours.”

The Department of Energy (DOE) said last week that more yellow, and possibly red, alerts are expected in the coming weeks as the country has already exceeded its forecasted demand given the prevailing heat levels.

The scorching heat, aggravated by the El Niño phenomenon, has affected the performance of the power plants. In fact, the actual demand of 9,301 megawatts (MW) for this year has already surpassed the forecast of 9,226MW for 2025.  The demand is expected to rise further in the coming weeks this May, the typical period for peak demand or the year.

“This clearly shows that the alert issuances this 2024 are significantly affecting the condition of the power system attributable to the aforementioned reasons. Data from the WESM for the periods when the high heat index was recorded and alert notices were issued show that the average prices per day increased by an average of 11 percent in Luzon and 53 percent in Visayas, which will translate to a significant impact in the consumers’ electricity bill,” the ERC said on Wednesday.

The ERC also ruled that the WESM suspension shall be lifted only if the regional available capacity, less actual regional demand, reaches above zero for 24 consecutive hours.

“The Commission is working doubly hard to alleviate the impact of El Niño on our power system, and we are finding ways to mitigate the impact of the extremely high demand resulting from the high heat index as these ultimately affect our consumers,” ERC Chairperson Monalisa Dimalanta said.

Epira mandate

SECTION 30 of Republic Act No. 9136, or the “Electric Power Industry Reform Act of 2001” (Epira) empowers the ERC to suspend the operation of WESM or declare a temporary WESM failure in cases of national and international security emergencies or natural calamities. 

Section 2, Article I of ERC Resolution No. 12, Series of 2018 further defines “Natural Calamity” as an act, event, happening or occurrence due to natural causes, thus, without interference or aid from man. Some examples are flood, earthquake, storms, hurricanes, wildfires, tsunamis, typhoons and volcanic eruption that will gravely affect the power system.

With the recorded increasing temperature, the government’s Task Force El Niño reported that 103 cities and municipalities have already declared a State of Calamity. On this basis, the ERC has determined the occurrence of conditions equal to or comparable to a natural calamity as defined in ERC Resolution No. 12, series of 2018.

 “We are also reiterating our call for distribution utilities sourcing from the WESM to be proactive in exploring ways to lessen their exposure. Impact of high prices can also be alleviated by existing programs, such as the anti-bill shock lending program of the Land Bank of the Philippines, to at least allow consumers to pay through installment the incremental increases in their electricity bill,” added Dimalanta.

PE2’s call

MEANWHILE, the Philippine Energy Efficiency Alliance (PE2) called for a strategic shift in managing electricity peak demand.

“PE2 believes that our limited power supply capacities can be optimally planned and dispatched if we try to flatten our steep peak demand curves as an initial step. There is so much talk about beefing up our thinning reserves by accelerating the addition of new power plants, but there are no conscious and concerted efforts toward shaving or shifting peak demand toward off-peak periods,” said PE2 President Alexander Ablaza.

PE2 said a significant portion of the countrywide 3,340-MW rise in summer demand can actually be flattened through either peak-shaving or load-shifting toward off-peak hours.

Permanent peak shaving can be achieved through aggressive replacement of energy-intensive systems in the commercial, industrial, transport and government sectors with more efficient technologies. On the other hand, a portion of the current peak demand can be shifted to off-peak hours or periods through a wide range of energy storage technologies, which now include thermal, kinetic and battery energy storage systems.

“While it would be theoretically impossible to achieve a totally flat demand curve, our energy-use economy should at least aspire to reduce the 3.3 gigawatts (GW) bump in peak demand every summer,” Ablaza said.

He said the ERC can even revisit studies to widen time-of-use differentials between peak and off-peak hours as a policy measure to incentivize private sector investments in load-shifting technologies such as energy storage systems.


Written/Posted by:
Lenie Lectura and Samuel P. Medenilla

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