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Blackouts to result in high electricity bills

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By Myrna M. Velasco

As settlement prices in the Wholesale Electricity Spot Market (WESM) cognitively breached the secondary price cap on Friday’s rotating blackouts, the next ‘painful blow’ on consumers will be high electricity bills.

 

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To hit the secondary price cap in the spot market means the cumulative price threshold of P9.00 per kilowatt hour (kWh) in the rolling generator weighted average price (GWAP) had already been reached over the prescribed five-day period.

At an average rate of P9.00 per kWh, that is roughly P4.00 per kWh higher than the P5.082 per kWh average settlement price in the WESM in March supply month. Thus, market intervention has to be enforced to trim the settlement price to the level of P6.245 per kWh.

WESM operator Independent Electricity Market Operator of the Philippines (IEMOP) has formally informed industry participants as well as the Energy Regulatory Commission (ERC) and the Department of Energy (DOE) on the “indicative imposition of the secondary price cap on April 12” or the so-called Friday brownouts.

“For the immediate trading interval following the breach of the cumulative price threshold (CPT), the settlement price for each generating unit shall be capped at the rate of P6,245 per megawatt hour,” IEMOP has stipulated.

It has to be noted that on several trading hours on Friday, settlement prices have been hitting as high as P26 per kWh and was even constantly transgressing the primary cap of P32 per kWh.

IEMOP indicated market intervention had been implemented on several trading intervals starting at 9:45am on Friday (April 12) – which was also the start of the rolling power interruptions. A trading interval would refer to the one-hour duration of the bid offers of generation companies (GenCos) in the spot market.

For the secondary cap, IEMOP stated that this “shall continue until the rolling GWAP falls below the cumulative price threshold,” which is the P9.00 per kWh reference point. The GWAP refers to the average trading price that each participant-generator has been reaching in their price offers in the market.

The market operator expounded that “if the resulting market clearing price (MCP) is lower than the price cap, the MCP shall be applied for the affected trading intervals.

It further emphasized that “during the period when the price cap is imposed, oil-based plants are entitled to recover additional compensation,” but subject to compliance to prescribed requirements and rules. In spot market trading in energy, the oil plants often serve the peaking needs of the electricity system – and oil-fired power plant operators generally complain that with low spot price settlements, their fuel costs cannot be fully recovered.

In the merit order of dispatch, the oil plants are typically the last in the stack because they usually have the most expensive price of power – albeit they serve a critical purpose in the system especially when supply runs extremely tight.

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