Red alert stops spot market

President Ferdinand “Bongbong” Marcos Jr. directed the Energy Regulatory Commission (ERC) yesterday to suspend the operations of the Wholesale Electricity Spot Market (WESM) the moment the National Grid Corporation of the Philippines (NGCP) issues a red alert.

The instruction effectively blocks power plant operators from trading in the spot market when the demand is high, thus driving up electricity prices.

In his speech during the Labor Day event in Malacañang on Wednesday, Marcos said the emergency measure seeks to prevent price increases that could worsen the economic strain on households and businesses.

Under the Electric Power Industry Reform Act of 2001 (EPIRA), the ERC is empowered to suspend the operation of the WESM or declare a temporary WESM failure in cases of national and international security emergencies or natural calamities.

The Philippine Electricity Market Corporation oversees the WESM, which is a marketplace for trading electricity that was established under Section 30 of EPIRA, or Republic Act 9136.

The Department of Energy (DoE) earlier announced that more yellow and red alerts are anticipated in the next weeks because of tight supply.

Regulated prices

Instead of electricity from the WESM, generation companies are now mandated to make all their capacities available at administered prices.

Many power plants, including those contracted to provide ancillary services, make a killing by selling electricity to WESM instead of to their designated distribution utilities at a fixed contracted price.

The higher prices of electricity sold through the WESM are then reflected in consumers’ higher monthly bills.

In an order dated 30 April, the ERC declared that the suspension of WESM trading in Luzon and the Visayas would be triggered by the NGCP issuing a red alert, which would mean that demand had exceeded the capacity of the grid.

“The ERC 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 and CEO Monalisa Dimalanta said.

“We are also reiterating our call for distribution utilities sourcing from the WESM to be proactive in exploring ways to lessen their exposure,” she added.

Yellow status yesterday

Despite the expected lower power demand yesterday which was a non-working holiday being Labor Day, the NGCP placed the Luzon grid under yellow alert from 8 to 10 p.m.

During periods of high heat index and alert notices, data from the WESM revealed a significant spike in average daily electricity prices, with Luzon experiencing an 11-percent increase and the Visayas seeing a substantial 53-percent surge.

According to Dimalanta, the stakeholders should also activate measures such as the Anti-Bill Shock Lending Program to allow consumers to pay on installment the incremental increases in their electricity bills.

State of calamity growing

The ERC said the decision to suspend the market was supported by the Task Force El Niño report that there are 103 cities and municipalities that have declared a state of calamity due to the extreme heat.

As such, the commission has determined the occurrence of conditions equal to or comparable to a natural calamity as defined in ERC Resolution 12, series of 2018.

The ERC also said the WESM suspension is automatically lifted if the available regional capacity less the actual regional demand exceeds zero for 24 consecutive hours.

Energy Undersecretary Rowena Cristina Guevarra said that should plants experience unplanned outages as was the case earlier this month, the alert status might jump to red.

Recall that the DoE declared last year that despite El Niño, there would be no red or yellow alerts anticipated this year because multiple solar power facilities were anticipated to come in and offer extra power.

Strategic power shift urged

The Philippine Energy Efficiency Alliance called for a strategic shift in the country’s efforts to address power supply deficits.

The group said in a press statement that focus should be directed toward the management of the peak demand as a prerequisite to planning new generating and transmission capacities.

PE2 president Alexander Ablaza said opportunities to flatten daily and seasonal peak demand curves should be exhausted first before planning to build new power plants.

“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,” Ablaza said.