DOE to name ‘profiteering GenCos’ in WESM

By Myrna M. Velasco

The Department of Energy (DOE) said it will release the list of power generation companies (GenCos) that may have gained financially in price spikes at the Wholesale Electricity Spot Market (WESM) following the string of recent yellow alerts in the power system.

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Even if the price spikes had just been happening for several hours, it was emphasized that the GenCos could strategically rake in millions to billions of profits from those trading intervals when supply would really run tight in the system.

The series of yellow alerts or power reserve-deficient conditions in Luzon grid propelled by forced outages manifests imprudent operations of a power system – either due to ageing power plants; generating assets being run to the ground because of deferred maintenance schedules; lack of decommissioning policy of the government for the very old power fleets; error in energy planning; or there could also be probability of capacity withholding (intentionally not making plants available) by some industry players. In the last scenario, supply tightening could happen artificially and yet this may still drive prices up in the spot market.

Energy Undersecretary Felix William Fuentebella indicated that on the request of the media, the list of companies that have earned the highest revenues during the yellow alerts will be released at the end of each supply month.

He said the Independent Electricity Market Operator of the Philippines (IEMOP), which is manning the day-to-day operations of the WESM, will be compiling the data and will make it available to the public in due time.

The energy official, at the same time, has indicated that they will scrutinize anew the supply contracts of the GenCos- primarily the provision on replacement power when their generating facilities would suffer from forced or unplanned outages.
Power supply agreements (PSAs) often carry allowable outage allowance for the generating units – and beyond that, there should be penalty mechanisms set forth in their deals with offtaker-distribution utilities.

Relative to this development, the Energy Regulatory Commission (ERC) has announced that it is “conducting analysis on the bidding behavior of generators to determine whether there was intent to drive prices up.”

ERC spokesperson Floresinda B. Digal said the regulatory body is “dispatching (its) technical people to validate the reasons for the claimed forced outages.”
She further narrated that “since the start of the yellow alerts on April 1, the market clearing prices range from P3 to as high as P8 per kilowatt hour.”

Digal emphasized though that if reckoned on the five-day rolling average of the generators weighted average price, this has not so far breached the prescribed cumulative price threshold, hence, “there was no imposition of the secondary price cap.”

The price cap in the WESM is set at P32 per kWh -- that was reduced from P64 per kWh in 2013, following allegations of collusion among power generations (also on election year) that should have resulted in more than P5 per kWh rate hike for Filipino consumers had it not been stopped by the courts.