Citing possible ‘abuse: DOE eyeing suspension of power market reserves

CEBU, Philippines — The Department of Energy (DOE) is considering the suspension of the reserve market after unusual price movements pushed electricity reserve prices in the Visayas to as high as P30 per kilowatt-hour, raising concerns over possible market abuse by power generation companies.

Energy Secretary Sharon Garin said the DOE would refer the matter to the Energy Regulatory Commission (ERC) to determine whether suspending the reserve market or removing the mechanism would be appropriate.

Speaking at the Cebu Energy Summit at the Cebu Provincial Capitol on Monday, October 12, Garin said reserve market prices, originally around P10, had reportedly climbed to P20 and even P30 amid power supply concerns in the Visayas.

“If it's just a ground for abuse of some of our generation companies, we might as well suspend it,” Garin said.

She described the reported price movements as a possible indication of market abuse, stressing that the cost of electricity generation itself should not reach such levels in the Wholesale Electricity Spot Market (WESM).

“That's abuse of market already,” Garin said.

Garin said the DOE had already referred the matter to the Philippine Competition Commission (PCC) and would also seek the ERC's assessment of the reserve market.

The referrals are intended to determine whether the unusual price movements resulted from abusive market behavior and whether regulatory intervention is necessary.

Garin said the ERC would have to assess whether the reserve market should be suspended or whether a different course of action would be warranted.

The reserve market is intended to help secure additional power system reserves needed to maintain grid reliability.

These reserves support the electricity system when supply-demand conditions change or generating units become unavailable.

Garin said the mechanism was introduced partly because the National Grid Corporation of the Philippines (NGCP) was not securing enough ancillary services through contracts.

“So hopefully, NGCP can contract more of their AS para fixed contract na ‘yan,” she noted, referring to ancillary services.

She urged NGCP to obtain more of these services through fixed contracts rather than relying heavily on the reserve market, which she said could expose electricity consumers to unusually high prices.

Beyond reserve market prices, Garin called on NGCP to assess the transmission connection between Luzon, Leyte, and Cebu to determine how to improve electricity transfers to the province.

She said Cebu could draw additional power from Luzon through the interconnection passing through Leyte, but the capacity of the Leyte-to-Cebu link limits how much electricity can be delivered.

“You get your power from Luzon kung kulang, ‘no? Alam niyo naman, nagkakakonek sa Luzon, papuntang Leyte, and then Leyte to Cebu,” Garin said.

She cited a capacity of about 250 megawatts for the Leyte-to-Cebu connection, compared with a potential 450 MW that could otherwise be supplied through the wider transmission arrangement.

Garin said increasing the capacity of the Luzon connection would not be enough if the transmission link between Leyte and Cebu remained constrained.

She asked NGCP to assess the entire transmission route and determine what improvements would be needed to allow more electricity to reach Cebu.

Garin also explained why she was publicly raising the issue, saying she had not been getting the response she wanted from the grid operator.

“Bakit po ina-announce ‘yan? Kasi hindi ako pinapakinggan, eh. Kaya ‘yan-announce ko para kayo na naman humingi sa kaniya,” she said.

Garin said Cebu's electricity demand was growing by about 14% annually, significantly faster than the approximately 6% growth recorded in the rest of the country.

DOE forecasts ‘normal’ supply

DOE reported a normal power supply outlook across Luzon, Visayas and Mindanao for this week and the next two weeks, while monitoring generating units under forced outage.

At a press conference, DOE Undersecretary Mario C. Marasigan said no yellow or red alerts are currently projected based on the latest power supply assessment.

However, Marasigan cautioned that delays in the scheduled restoration of generating units in Luzon could tighten available reserves and raise the risk of power supply alerts in the succeeding weeks.

The DOE said the timely restoration of offline facilities is critical in maintaining adequate operating reserves and minimizing the risk of power supply alerts, particularly over the next two weeks.

In the Visayas, power supply conditions remain normal, supported by available generation and electricity transfers through the interconnected grid.

The DOE is also strengthening its monitoring of critical transmission infrastructure, noting that reliable power supply depends not only on generation capacity but also on the ability of the grid to efficiently deliver electricity.

The department is identifying transmission lines and substations across the three major grids that have experienced frequent forced and unplanned outages, as well as corrective measures to address recurring disruptions and minimize their impact on electricity supply. (CEBU NEWS)