WESM settlement prices tracking downward shift

Published September 26, 2021, 7:50 PM

by Myrna M. Velasco

Settlement prices of traded capacities at the Wholesale Electricity Spot Market (WESM) continued to track downtrend because of improved supply margins while demand also skidded due to the re-imposition of stricter lockdown last month, the Independent Electricity Market Operator of the Philippines (IEMOP) reported.

WESM Logo

John Paul Grayda, manager for market simulation and analysis division of IEMOP, explained that there had been marked increase in available capacities of the power plants, while demand decreased to 9,800 megawatts this month, Sept., from the level of more than 10,100MW last month.

“We have increase in supply, then there is drop in demand, therefore, we have increase in margin. Of course, we expect lower price, so on the average so far for September, we have P3.10 per kilowatt hour (kWh) rate,” he said.

The downward shift in spot market prices will be beneficial to the Filipino consumers, because such could eventually be reflected as reduction in their electric bills – depending on the WESM procurement exposure of their servicing distribution utilities.

According to Engineer Robinson Descanzo, chief operating officer of IEMOP, it was only in recent weeks that demand started ramping up. He attributed the increasing demand mainly to the easing of restrictions in Metro Manila, the country’s economic center.

“Demand slightly climbed, and that’s an indication of the reclassification of quarantine measures – primarily in allowing businesses to already partially reopen,” he said.

Descanzo emphasized that the swing in supply-demand outlook remains unpredictable, but if the easing of quarantine restrictions will continue, “We will see improvements in demand – that’s the outlook we’re seeing in the coming few weeks.”

The IEMOP executive noted of lower demand from the residential sector in recent weeks because of colder temperatures triggered by the prevailing rainy season.

“Prices continue to drop in the WESM as the country experiences intermittent rain showers and cold weather as the third quarter of the year comes to a close,” the spot market operator indicated.

As specified, the settlement price in August was at the level of P4.76 per kWh, a P1.66 per kWh decline in the current month — reckoned from the outcomes of WESM trading as of September 21.

“The price drop is attributed to ample supply, mostly from coal power plants, and a decrease in demand from 10,111 megawatts last August to 9,824MW in September or by 2.83-percent,” IEMOP reiterated.

It added that “this trend has been observed since the month of June given the persisting colder weather conditions,” with IEMOP emphasizing that “the total spot percentage also decreased for this period by 9.6 percent to 8.6 percent.”

Prior to the deceleration of prices in August and September, effective settlement prices in the spot market had been relatively steep in June and July at P7.26 per kWh and P7.12 per kWh, respectively. It was also higher at P8.31 per kWh in May.

 
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