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THE
Department of Energy said on Friday the Energy
Regulatory Commission (ERC) will determine the actual
price recoverable from consumers due to the congestion
problem in the San Jose, Bulacan, substation of the
National Transmission Corp. (Transco).
Energy
Secretary Angelo Reyes recalled that prices in the
Wholesale Electricity Spot Market (WESM) have been
volatile in the past months and are expected to continue
to be so until October this year.
Reyes
said the transformers are currently being fixed.
“We
agreed that the actual price recoverable from consumers
will be determined by ERC after evaluation of pertinent
documents to be submitted by the Philippine Electricity
Market Corp. [PEMC], Manila Electric Co. [Meralco] and
Transco,” said the energy chief.
Reyes
said he also ordered PEMC to review WESM rules covering,
among others, WESM pricing policies that will promote
stability, greater efficiency and transparency for all
stakeholders.
Reyes
earlier said PEMC has proposed several resolutions to
cushion the price impact to consumers in a meeting on
September 1.
Among
the proposals of PEMC, Reyes said PEMC suggested the
implementation of ERC Resolution 12 that will shield a
significant portion of WESM customers from high prices
through their transition supply contracts (TSCs) with
the National Power Corp. (Napocor).
Another
measure, according to Reyes, is the immediate return of
90 percent of the net settlement surplus to customers to
further reduce the spot-market effective settlement
price by as much as 45 percent.
A
price-mitigation measure was also set up in the event
major transmission outages will occur in the future. The
measure provides for a triggering mechanism which will
initiate price substitution in the affected locations on
the grid. The substituted price will exclude the cost of
line congestions and will only count the marginal price
of generation.
Reyes
pointed out that the price-mitigation measure, however,
will be subject to ERC approval since decisions on
consumer prices are under the ERC mandate.
Reyes
said he will call a meeting with the ERC to discuss how
the situation will be managed.
He also
mentioned the possibility of suggesting the deferment of
the implementation of pass-on price volatility in the
WESM and instead charge this cost under the stranded
cost mechanism.
“We’ve
been conducting a series of meetings regarding the
problem. We are looking at spreading out the costs on
industry stakeholders, such as the generators and
utilities, to at least mitigate the impact. The
congestion was unforeseen but it happened,” Reyes
earlier said.
The
energy chief said the government wants to minimize the
impact on the public, and that it is the government’s
job to insulate the public from increases.
“It’s a
very complicated thing and we’re trying to crank out a
solution to insulate the public, especially on rate
increases,” the energy chief said.
Prior to
Reyes’s pronouncement, the ERC had decided to suspend
certain rules of the WESM in order to cushion the impact
of the sudden increase of power rates at the power
market.
With the
ERC not being able to intervene and suspend market
operations, it instead decided to just indefinitely
suspend Rule 3.5, Article 3 of the WESM rules,
effectively shielding consumers from having to pay for
expensive electricity due to volatilities in the spot
market.
Rule
3.5, Article 3 of the WESM Rules says any distribution
utility (DU) with an existing TSC with Napocor, but
which opted to become a direct WESM member, will no
longer enjoy the 20-percent allowance over its
contracted capacity with Napocor.
Anything
above that contracted capacity must be paid at the price
of WESM.
The rule
added that all imbalances beyond the 100-percent
contracted level of said DUs will be deemed taken from
the WESM.
The
suspension of this rule will allow the DUs to apply the
time-of-use rates of Napocor as the applicable rate for
the said month, cushioning the prices from market
volatility.
The ERC
noted, however, that the said rule will, however, be
reinstated once the Transco completes the repair work on
the San Jose Substation.
The
Transco also said it has arranged the transfer of three
200-megavolt ampere transformers from its Kadampat
Substation in Labrador, Pangasinan, to temporarily
replace the damaged transformers at Transco’s San Jose
Substation in Bulacan.
Transco
said the transfer came after the spare transformers at
the San Jose Substation also broke down prematurely in
July after only 10 years of service as against the
normal substation transformer lifespan of 35 to 40
years.
As a
result, Transco said the coal-fired plants had limited
dispatch and oil-fired plants had to be used.
It added
that technical measures were also considered to avoid
the higher generating costs, but these would have a high
risk of system breakdown which could result in
widespread brownouts.
Transco
said it is also speeding up the completion of the
230-kilovolt San Manuel-Concepcion-Mexico transmission
line, which will allow the higher dispatch of
hydroelectric plants, which are of lower costs compared
with oil-fired plants being used now.
Transco
said the transformers from Kadampat are expected to
arrive at the San Jose Substation on the first week of
September and are targeted for energization by September
27.
The
transfer was delayed due to the passage of Typhoon
Julian last week and the continuing rainy weather which
could damage sensitive transformer parts.
Once the
replacement transformers are in place, Transco would be
able to restore full dispatch of electricity from
cheaper power sources in Luzon such as coal fired and
hydro-electric plants.
Lasse
Holopainen, president of PEMC, earlier said the PEMC—operator
of WESM—will seek the ERC intervention to cushion the
possible impact of the spike in power rates last month
at the power market.
“We have
discussed this concern with the regulator,” said
Holopainen, adding that measures have already been
tossed around to cushion the possible high prices at the
WESM caused by congestion in the power transmission
lines after the San Jose transformer of Transco
sustained damage.
Based on
PEMC’s initial computations, the PEMC official noted the
effective settlement price for July averaged at P18 per
kilowatt-hour (kWh) with settlement surplus, or P9 per
kWh without settlement surplus.
If
billed, Holopainen said the price spikes would impact
Meralco customers by around P1/kWh.
Holopainen
said the WESM operations in July have 63 price intervals
in question, which are being reviewed and recalculated.
“The
prices have resulted from a major transmission
problem—San Jose—which effectively cut our market in
half.
Now,
not only has this caused us a lot of problems, in terms
of recalculating everything, but there are about 60
intervals—which is under discussion now with the
regulator as to whether there should be an
intervention,” added Holopainen.
He said
distribution utilities like Meralco can actually opt to
apply the TOU rates of Napocor and another option would
be PEMC setting an administered price based on what is
provided for under WESM Rules.
He also
warned that repairs on transmission facilities would
take until September or October this year.
“There
is a need for stakeholders and the ERC to come up with a
solution that will mitigate the impact on consumers.
What we’re having is an unusual situation, which is not
related to generation or fuel-supply problems as what
was experienced in the past,” said Holopainen. |
