ERC probes plants with high WESM price bids

by Myrna Velasco – August 7, 2016

from Manila Bulletin

With the blackouts pestering Luzon consumers last Friday, the Energy Regulatory Commission (ERC) is probing not just the “causes” of technical glitches in power facilities but also chase the responsible generation companies that have put up high price bids in the Wholesale Electricity Spot Market (WESM).

The regulatory body suspects that firms with high WESM price bids may have taken advantage of the tight supply to drive up spot prices for their own benefit or those of their affiliates.

ERC Chairman Jose Vicente B. Salazar in his letter to Energy Secretary Alfonso G. Cusi has stipulated that “the Philippine Electricity Market Corporation (PEMC), through the Market Surveillance Committee (MSC), has already been requested to submit a report on the bidding activities of the identified participants during this tight supply situation and identify acts or omissions which may have constituted breaches in the WESM Rules, abuse of market power and/or anti-competitive behavior.”

The sporadic yellow and red alert declarations made by the system operator for Luzon grid had just brought back narratives of the November-December 2013 horrors of simultaneous power plant shutdowns that eventually led to unacceptable price hikes of up to P5.00 per kilowatt-hour (kWh) in the consumers’ electric bills.

From that incident, policymakers, regulators and industry players have expectedly learned tough lessons, including coordinated and well-planned maintenance shutdowns of power generating facilities so capacity loss will not be of significant scale, thus, preventing rolling brownouts – that was until the unfortunate events again of the past three weeks.

Salazar further stated in his correspondence to the energy chief that “the Commission notes the occurrence of high price outcomes in the WESM during the period.” No data available yet as to which power plants have put up those “high price” bids.

Having identified the power plants that have gone on unscheduled outages during the aforementioned period, the Commission also required the owners/operators of these facilities to submit detailed reports on the causes of the forced outages including the contingency measures undertaken to address the same, within 48 hours from the occurrence of the outage event.”

Salazar qualified the Commission will then “validate the reasons proffered by these entities which may entail physical inspections of their facilities.”

He stressed “the ERC is still completing data from the power plants which were on outage status during the period in question.” It must be noted that yellow and red alert conditions in Luzon grid persisted from July 19 until the recent brownouts on July 30 and August 5.

Salazar revealed several generation companies failed to submit detailed reports on their outages. “We have reminded these companies again through a directive requiring submission within a 24-hour period,” he said.

He thus averred that “sanctions will be imposed in case of continued non-compliance with the ERC’s directive” asserting further that “sanctions can be in the form of show cause orders.”

In a separate press statement, the ERC has noted that “sustained high prices for a significant period of time may be sufficient ground to further look into the behavior of the players in the spot market.”

Salazar reiterated that if exorbitant price bids would turn out to be a constant market outcome, the ERC will also probe “the firms which may have taken advantage of the tight supply to drive up spot prices for their own benefit or those of their affiliates,” and that the regulatory body may “conduct another investigation, if warranted.”