WESM prices spike by P1.523/kwh after brownouts

By Myrna M. Velasco – April 25, 2019, 10:00 PM
from Manila Bulletin

After recurrence of rotating brownouts this month, consumers will have to suffer in their next billing roughly P1.523 per kilowatt hour (kwh) surge in rates due to spikes in Wholesale Electricity Spot Market (WESM) prices triggered by extremely strained supply.


Official data from the WESM and Philippine Electricity Market Corporation (PEMC) presented at the Senate hearing exhibited that settlement spot prices already went up to P6.605 per kWh as of April 15 versus the March average of P5.082 per kwh.

With 15 percent of power volume sold in the spot market within April, it has been calculated that the cost impact on consumers’ bills in May will hover at P0.23 per kWh.

This estimated rate hike will not just affect the consumers of Manila Electric Company (Meralco) but will be shared by all end-users in the Luzon grid, including those served by the electric cooperatives.

It has been qualified though that the whole supply month of April is not fully concluded yet – with at least two weeks still remaining to be collated, which is still extraordinarily characterized by exceptionally tight supply conditions.

As could be culled further from the WESM operator Independent Electricity Market Operator of the Philippines (IEMOP), bilaterally contracted capacities are just at the level of 79 percent; while capacities being traded in the spot market are at the level of 21 percent.

Around April 12 when the severity of the rolling brownouts were happening, the secondary cap in the WESM had also been hit – meaning, the prescribed cumulative price threshold of P9.00 per kWh within the seven-day period had already been breached.

That then prompted the WESM operator to enforce the secondary cap of P6.245 per kWh at least to cushion the impact of consumers. As it appears though, even this will not be able to fully shield ratepayers from power price spikes in the upcoming billing cycle.

WESM data likewise showed that a settlement price of P21.60 per kWh had been breached for sustained 10 hours in at least one trading day within April – and the highest prices being hit for the month were in the ranges of P16 to P27 per kWh.

Given the spikes in prices resulting from the high costs traded in the spot market – especially in the procurement of replacement power of power plants suffering from forced outages, Senate committee on energy chairman Sherwin T. Gatchalian quizzed relevant government agencies like the Department of Energy (DOE) and Energy Regulatory Commission (ERC) why the consumers are being burdened with higher rates when power plants suffer from outages due to technical glitches.

“There is no disincentive for the power producers to avoid all of these (forced outages) because they are not being penalized, so I want a policy that will penalize the power producers because it’s the consumers that bear the brunt,” he pointed out.