Market operator cushions price spikes in WESM

Published October 11, 2018, 12:00 AM

by manilabulletin_admin

By Myrna M. Velasco

With the combined effect of transmission congestion and the shutdown of some power plants, cleared prices in the Wholesale Electricity Spot Market (WESM) had gone as high as P19.00 to P20.00 per kilowatt hour (kWh), but the Independent Electricity Market Operator of the Philippines (IEMOP) immediately instituted measures to avert high pass-on cost impact to consumers.

IEMOP President Francis Saturnino C. Juan said the spot market immediately activated price substitution methodology (PSM) so the consumers won’t be unduly burdened with increases in electricity rates out of the twin set of events in the power system.

With PSM, he noted that spot market prices were not being cleared at the marginal plant traded in the WESM, instead, the IEMOP temporarily based it on the bid cost of the trading plants.

For instance, in the bid prices of the baseload coal plants that were generally at P3.00 per kWh, they were cleared at the price level. And for the marginal plants which had been diesel or bunker-fired facilities, it had been correspondingly decided that they shall be settled at the higher price or as they offered in the market.

In particular, he indicated that the Limay bunker-fired facility in Bataan tendered a price offer of over P19 per kWh on Wednesday (October 10) for a certain trading interval and was also held as the marginal plant, so the market decided that its settlement price would be at that level.

“There had been price separation – so the coal plants were cleared at P3.00 per kWh or their bid level; and the Limay plant was also cleared at its bid price of P19 per kWh because it prudently mirrored the tightness of supply in the market,” Juan explained.

He stressed that there had been constraint in the transmission capacity because one bank of the San Jose substation of the National Grid Corporation of the Philippines had been on scheduled maintenance shutdown – starting two weeks ago until October 16, 2018.

The IEMOP chief executive noted there are available plants from the northern part of Luzon as well as Quezon and those from Bataan, but the existing line capacity cannot accommodate all of them, despite the N-1 contingency in the system.

Further, it was divulged that there had also been plants on scheduled maintenance downtime – including unit 1 of the Sual plant which had been on shutdown since September 1; and unit 2 of South Luzon Thermal Energy Corporation (SLTEC) which had been out since June 28 this year.