WESM operator mulls suspension of trading due to price spikes

The Philippine Electricity Market Corp. (PEMC) is looking at the possibility of temporarily suspending the operations of the country’s wholesale electricity spot market (WESM) as significant spikes in trading prices remain a problem.

PEMC president Lasse Holopainen told a press conference that halting trading at the WESM is among the options they are studying if the Energy Regulatory Commission (ERC) does not intervene to mitigate the prevailing high prices in the market.

“That is an option. But we prefer that ERC do something about it first. The ERC can intervene and correct these prices and effect a time-of-use (TOU) rate,” Holopainen said.

But the PEMC chief said they are still looking at the parameters to justify a need to suspend the market trading.

Under the WESM rules, intervention and market suspension can be imposed if there is an extreme state condition in the grid arising from an emergency, threat to system security and an event of force majeure.

Holopainen pointed out that these higher settlement prices are not yet billed to the traders hence consumers will not be affected yet.

Based on PEMC’s initial computation, settlement prices – the price the trader (power generator/distributor like Manila Electric Co.) pays to WESM and eventually passes on to its customers – have reached as high as P18 per kilowatt-hour with the net settlement surplus and about P8.76 per kwh without the said surplus. This was significantly higher than the P2.45 per kwh settlement price in June.

Since Meralco traded only six percent in WESM last month, its customers will be paying about P1 per kwh more if the ERC does not intervene and correct the pricing errors.

The pricing errors at the WESM during the period was triggered by the bodgown of the San Jose transmission line in Bulacan. This transmission constraint, which is expected to persist until October this year, disallowed the dispatch of efficient power plants, thus shooting up WESM’s trading prices.

“This is an unusual occurrence and the congestion will be there until September to October. But National Transmission Corp. (TransCo) said they are now repairing it,” Holopainen said

But he added said electricity consumers should brace themselves for higher prices in the next few months even as these pricing errors are corrected by the ERC.

“Meralco will be filing an appropriate price adjustment to the ERC to reflect these WESM prices. But we hope ERC will be able to intervene to protect the interest of the public and the investors as well,” he said. “We are looking at a slightly higher rate than TOU for July.”

He said the consumers will be able to know how much will be the actual impact of this, depending on the decision of the ERC whether to intervene or not.

Meralco vice president and head of utility economics Ivanna dela Pena, on the other hand, said they are still awaiting the billing from PEMC to determine how much will be the impact of the surge in WESM prices to their customers.

The impact of WESM prices is being reflected in the generation charge of Meralco, which stood at P4.411 per kwh last month. Meralco sources about 10 percent of its requirement from the electricity spot market.