WESM’s must-offer-rule violations focus of ERC probe

by Myrna Velasco, December 20, 2014
from Manila Bulletin

The probe on the alleged collusion of power plants during the problematic November and December supply months last year has been zeroing in on the alleged violation of some plants on the must-offer-rule being enforced at the Wholesale Electricity Spot Market.

This was indicated to the media by Energy Regulatory Commission (ERC) executive director Francis Saturnino Juan, while stressing that “they have seen some initial hints that some plants may have breached some market rules.” In fact, he said, that was their basis then in ordering the reduction in WESM prices.

But he clarified such initial findings are being re-validated by the Investigation Unit (IU) created by the ERC to specifically look into the alleged collusion by players in the WESM on last year’s tight supply situation due to the shutdown of the Malampaya gas production facility.

The must-offer-rule is a policy in the spot market which enjoins all power producers to make their capacity available and be ready once called for dispatch.

Validated technical constraints and glitches (which may include triggers for forced outages) and scheduled shutdowns shall be the only factors that must be warranted on any plant’s unavailability of capacity.

Juan has noted though that the IU “is not yet prepared to come out with the result of its investigation.”

He specified that “evaluation of pieces of evidence is still on-going, but once they have completed the process, they will file complaint to the ERC if they will find prima facie evidence against market participants.”

It was an official of the Department of Energy (DOE) who told Congress of their suspicion then on the supposed ‘collusive acts’ of power generation companies in their trading activities at the WESM.

At that time, the unwarranted spikes in electricity rates of the Manila Electric Company (Meralco) ignited consumer revolt because the P4 to P5 per kilowatt hour increase in their electric bills had been extremely unacceptable.

The allegation was predicated on simultaneous shutdowns of power plants – including forced outages – plus the supposed withholding of capacity of some players when they should have been called for dispatch by the system operator.

Juan reiterated that the IU’s task was not easy considering the volume of documents and data that they would have to examine to draw up ‘conclusive findings ‘on the case.

The ERC has previously explained that the IU was created as an ad hoc body – and that it was an independent entity from the Commission. Its sole purpose was to extensively investigate the circumstances relating to the unprecedented spike in electricity price in the November-December 2013 billing of Meralco.”

Part of their rigorous task would be to analyze data involving 1,440 transactions in the electricity spot market for the supply months of October and November. These refer to trading data of 24 hours for 30 days over two months duration.