LKI 48th Press Statement
October 16, 2019
ELECTRICITY SPOT PRICES ON THE MARK AGAIN.
In the past 2 days , Luzon had experienced insufficient power supply due to scheduled and forced outages of some power plants. just how much the Wesm prices behaved the past 2 days?
IT was indeed a welcome news that Meralco had started commercial operation of a state of the art coal fired power plant of 509MW that added supply to the Luzon power supply amidst this recent Yellow Alerts .
But what had happened in the investigation of collusion among power plants last Summer that spiked Wesm prices to as high as almost php 13.00 per kwh in the Meralco bill. FOR THE October billing Wesm Prices is a very low php 1.62 per kwh .
LABAN KONSYUMER Inc. Had written the PEMC President Oscar Ala and had received a report. THE REPORT said some power plants are recommended for the imposition of fines after the due process requirements are complied.
THE consumer group was also informed that there are website data on market prices either daily , every 7 days and monthly to track how.wesm prices are traded and settled.
In the interest of sharing information to the consumers the report in tabular format as sent by PEMC is attached in this statement.
Responses to Laban Konsyumer Inc. (LKI) Inquiries
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1 First, may we know the result of the investigation of possible collusion and spot market manipulation that resulted to a PhP12.0427 /kWh for the month of July 2019. This matter was part of the record of the Senate hearing held before the election. There was a commitment from the market operator to recommend penalties and fines when appropriate. When the report is ready, may we request for public disclosure of said report. LKI is referring to the June 2019 Billing Month which has an average price of PhP7.770 /kWh affecting the July 2019 Bill of MERALCO.
During the June 2019 billing month, the demand continued to increase as hot temperatures manifested related to the summer season. On the supply side, there were forced outages from the major coal and natural gas plants which were relatively cheaper. This resulted in very tight supply-demand situation with more expensive plants being scheduled/dispatched to meet the increasing demand and thus, setting the high market price.
Anent to the PEMC’s commitment, the Enforcement and Compliance Office (ECO) has already concluded its preliminary compliance monitoring and has submitted to the PEM Board for its approval, the companies which would necessitate further investigation. Once the investigation has been completed, reviewed by the Market Surveillance Committee (MSC), and approved by the PEM Board, penalties shall be imposed on the participants who are found to be in breach of the Must-Offer-Rule and RealTime Dispatch compliance.
As part of its regular functions, what the ECO is currently investigating are noncompliances to the WESM Rules on Submission of Maximum Available Capacity and Real Time Dispatch
Schedules /Instructions. Any finding of breach on these two WESM Obligations
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are meted corresponding penalties and sanctions. In case there is any indication of a price manipulation or anti-competitive behavior which may be found by ECO during its regular compliance monitoring, PEMC will report it to the ERC for appropriate action.
But, as we pointed out during the hearing of the Senate Committee on Energy and the Joint Congressional Power
Commission (JCPC) last April 25 and May 2, 2019, respectively, the authority to formally investigate and penalize, acts or conduct constituting abuse of market power or anti-competitive behavior belongs to the ERC and the Philippine Competition Commission (PCC). Although the conduct of any investigation on possible collusion and spot market manipulation may not be part of the regular functions of PEMC-Enforcement
Compliance Office (ECO), this would not preclude PEMC-ECO from conducting the necessary investigation relative to the July 2019 billing period once directed by the Energy Regulatory Commission, (ERC) or the PCC, pursuant to Republic Act No. 9136 (EPIRA) and Republic Act No. 10667 (Philippine Competition Act).
Also, we note that in July 2019, following the better supply and demand condition, market prices in the WESM recorded a notably lower average at Php4.657/KWh (Php4,657MWh), which is in fact lower than the average price in June at Php 7.770/KWh (Php 7,770/MWh).
2 Secondly, the prices in WESM went down to Php5.8347/kwh in August and Php2.1844/kwh in September 2019. The decline resulted to lower Meralco rates. May the consumers be informed on the circumstances for the substantial Prices in the WESM are lower in August and September 2019 compared to July 2019 and previous months. This can be attributed to the increase in available capacity as well as lowering of demand. Increase in available capacity is mainly
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reduction. Hopefully, the fundamentals of the WESM should result to a stable, predictable, reasonable and least cost of electricity for the consumers. due to the decrease in outage capacity as major plants have completed their scheduled outages, as well as higher availability of wind and hydro-electric power plants. The availability of the latter also led, correspondingly, to lesser utilization of the more expensive oil-based power plants. Meanwhile, the decrease in demand can be attributed to the colder weather conditions in August and
September 2019 with the onset of the rainy season. These factors lead to the higher supply margin. Please see Annex “A” hereof.
As regards other concern on prices in the WESM, it is important to note the Market Dispatch Optimization Model being used in the WESM is hinged on determining the optimal dispatch schedule and pricing based on demand and supply interplay, and market participant offers’, subject to network constraints.
The WESM prices reflect the changing supply and demand situation depending on the season and time of the day. Electricity demand normally goes down during the colder season. When there is abundant supply and low demand, market prices would tend to be low, which was the case for the August and September 2019 billing months.
On a monthly basis, PEMC, through its
Market Assessment Group
(MAG), generates and publishes the results of its assessment of the WESM, which includes, among other things, discussion of market prices and supply and demand. Said reports are available in the download sections of the WESM website at:
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http://www.wesm.ph/inner.php/downloads
/ monthly_market_assessment_reports
Moreover, the WESM website provides information on the Market Bids and Offers submitted by Trading Participants.
3 Thirdly, under your leadership, a full disclosure of the 24-hour trading of price offers of the spot market to be published in major newspapers, similar to the practice being done in the stock market. The publication of the 24-hour trading market price shall be the best evidence of a competitive spot market. The Supreme Court had laid the basis for a competitive power market making mandatory the selection of power supply agreement contractors. The spot market should emulate and mirror the principle laid by the Supreme Court. The resulting market prices and schedules are published the day after in the WESM website. You may visit the link below for reference:
http://www.wesm.ph/inner.php/downloads
/market_prices_&_schedules
On the other hand, the market bids and offers are published after seven (7) days in accordance with the Market Operator Information Disclosure And Confidentiality Manual.
You may visit the link below for reference: http://www.wesm.ph/inner.php/downloads
/market_bids_&_offers
4 Fourthly, there are policy issues that your leadership could address now thru the independent electricity market operator. The bill of Sen Ralph Recto requiring a consumer representative in regulatory agencies is an innovative policy proposal that can be studied and considered by the PEMC Board.
PEMC, as governing body of WESM, continuously looks into existing policy issues where it can contribute for further development. But the proposal to appoint a regulator who belongs to a consumer group should properly be addressed to and decided by Congress. This has been proposed some thirty (30) years ago and has been repeated every now and then. Studies and commentaries by regulatory experts in the US and in other jurisdictions relative to such a proposal has generally not been favorable basically because of the difficulty of choosing which consumer group should be represented in the regulatory agency. As you know, regulatory bodies listen to the positions of different stakeholders whose views diverge and reflect opposing positions on various regulatory issues such as ratemaking, for example. Besides, to be
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blunt, stakeholders have their own agenda to pursue. Take for example the electricity end-users of a distribution utility, like
MERALCO, which are composed of
Residential Customers, Small Commercial
Customers, Large Commercial
Customers, and Industrial Customers, each of which have different interests and agenda to pursue in a rate case before the ERC, not to mention other consumers who are advocates of energy efficiency and renewable energy who would want also to pursue their own agenda. But the regulatory commission’s duty is to protect the broader public interest and so it has to take a broad societal perspective, whether for ratemaking or other matters, in its decision making. It is in a unique position of trying to do what is best from the public’s perspective. For after all, special interests do not represent the broad public interest.