IPPs urge DOE to strengthen proposed power reserve mart

MANILA, Philippines - The Philippine Independent Power Producers Association Inc. (PIPPA), the organization of the country’s power producers, is urging the Department of Energy (DOE) to strengthen the proposed reserve market by having an independent stakeholders group set the so-called reliability criteria of the country’s grids and levels of operating reserves.

This is in relation to the implementation of the planned reserve market on May 26.

In a letter dated April 7 to Energy Secretary Carlos Jericho Petilla, PIPPA welcomed the plan to establish a reserve market but called on measures to ensure its success.

“The reserve market will encourage capacity additions from the generators as their energy market can now be complemented by ancillary market opportunities hopefully at prices which are reflective of market forces and free from regulatory uncertainties,” PIPPA said.

The proposed reserve market would provide contracted reserve capacities or back up power for the country’s trading floor of electricity or the Wholesale Electricity Spot Market (WESM). It would be integrated to the WESM to make the costs of electricity more competitive, and provide reliable pricing incentives for prospective providers of both energy and reserves.

To enhance the efficient operations of the reserve market, PIPPA proposed an independent group that would establish the reliability criteria and levels of reserves.

“We propose that the reliability criteria and levels of operating reserves be set by an independent stockholders group or an expert panel independent of and distinct from the system operator,” PIPPA said in its position paper.

The group said the practice has gained wide acceptance in many other countries worldwide.

“In setting the reliability criteria, the stakeholders group or the expert panel shall take into consideration impact of power supply reliability on our economy, the capacity and willingness of end-users to pay for reliable service and the practical experience from other regulatory jurisdictions with operational reserve markets,” it said.

PIPPA noted that the reliability criteria and levels of operating reserves are currently set by the Energy Regulatory Commission (ERC), the power regulator, based solely on the determination of the National Grid Corp. of the Philippines (NGCP), the country’s trading floor for electricity.

“Regrettably, the basis of its reliability criteria is unsatisfactorily articulated,” PIPPA said.

“For the purpose of setting the reliability criteria and level of operating reserves by stakeholders or an expert panel, we recommend that the Grid Management Committee be charged with this responsibility with the National Transmission Corp. providing technical advice. We also suggest that the GMC conduct an open and public process to engage affected end-users in an information, education and consultation campaign so that cost impacts truly reflect the premium the economy puts on reliability,” PIPPA added.

The DOE is now laying the groundwork for the country’s reserve or backup electricity market even as the actual launch of this proposed reserve market has been moved to May 26 instead of March 26.

The DOE moved the schedule of the proposed reserve market as the ERC has yet to approve the Pricing and Cost Recovery Mechanism (PRCM) of the WESM Reserve Market.