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Monday, June 24, 2024

ERC temporarily halts WESM operations to curb power rates

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The Energy Regulatory Commission (ERC) has ordered the suspension of the Wholesale Electricity Spot Market (WESM) in Luzon and Visayas under certain conditions to mitigate the anticipated increase in prices in the spot market.

WESM prices have gone up amid the red and yellow alert notices due to the significant increase in demand amid high temperatures.

This developed as the National Grid Corp. of the Philippines (NGCP) placed the Luzon grid on yellow alert for the third consecutive day this week due to lack of available reserves.

NGCP placed the Luzon grid status on Yellow alert 8PM to 10 PM even as available capacity reached 15,026 megawatts (MW) compared to peak demand of 12,899MW.

NGCP said four plants has been on forced outage since 2023, three between February and March 2024, and 13 since April 2024; while two others are running on derated capacities for a total of 1409.3MW unavailable to the grid.

A yellow alert is issued when the operating margin is insufficient to meet the transmission grid’s contingency requirement.

“The Commission is working doubly hard to alleviate the impact of El Niño on our power system, and we are finding ways to mitigate the impact of the extremely high demand resulting from the high heat index as these ultimately affect our consumers,” ERC chairperson and chief executive Monalisa Dimalanta said.

The ERC, in an Order dated April 30, 2024, declared the suspension of WESM operations in Luzon and Visayas during instances of red alert, based on notices issued by the system operator.

The ERC said that during such period of market suspension, the administered price shall apply, or if a dispatch interval is subject to both a price mitigation (such as the secondary price cap) and the administered price, the lower of the two prices shall apply in the settlement of transactions for such interval.

The regulator said that with the continuous significant increase in demand along with the high capacity of generation plants on outage and/or deration, which resulted to a thinning of supply or reserve starting April 16, 2024, the grid has been experiencing red and yellow alerts.

Based on ERC data as of April 25, there was no red alert in the past three years in the Luzon grid, but 20:46 hours were already recorded for 2024 with 57:50 hours of yellow alerts compared to 14:56 hours in 2022.

The Visayas grid also recorded 24:14 hours red alerts from only three last year and 46:40 hours in 2024. ERC said this clearly shows that the alert issuances this 2024 are significantly affecting the condition of the power system attributable to the significantly higher heat index.

It said data from the WESM for the periods when the high heat index was recorded and alert notices were issued showed that the average prices per day increased by an average of 11 percent in Luzon and 53 percent in Visayas, which translates to a significant impact in the consumers’ electricity bill.

Under Section 30 of Republic Act No. 9136, otherwise known as “Electric Power Industry Reform Act of 2001” (EPIRA), the ERC can suspend the operation of the WESM or declare a temporary WESM failure in cases of national and international security emergencies or natural calamities. 

The regulator cited Section 2, Article I of ERC Resolution No. 12, Series of 2018 which defines “Natural Calamity” as an act, event, happening or occurrence due to natural causes, thus, without interference or aid from man. Some examples are flood, earthquake, storms, hurricanes, wildfires, tsunamis, typhoons and volcanic eruption that will gravely affect the power system.

The government’s Task Force El Niño reported that there are 131 cities and municipalities that have already declared a state of calamity due to the extreme heat conditions being experienced nationwide.

On this basis, the Commission has determined the occurrence of conditions equal to or comparable to a natural calamity as defined in ERC Resolution No. 12, series of 2018.

“We are also reiterating our call for distribution utilities sourcing from the WESM to be proactive in exploring ways to lessen their exposure,” Dimalanta said.

“Impact of high prices can also be alleviated by existing programs, such as the ANTI BILL SHOCK Lending Program of the Land Bank of the Philippines, to at least allow consumers to pay through installment the incremental increases in their electricity bill,” she added.

The Commission also ruled that the suspension of WESM shall be lifted only if the regional available capacity, less actual regional demand, reaches above zero for 24 consecutive hours.

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