ERC to suspend WESM trading when Luzon and Visayas are under red alert

Electricity prices are expected to rise due to increased demand during the summer months. — PHILIPPINE STAR/RYAN BALDEMOR

THE ENERGY Regulatory Commission (ERC) on Tuesday ordered the suspension of trading in the Wholesale Electricity Spot Market (WESM) during red alerts to prevent a spike in electricity prices.

“Due to the extreme heat, electricity consumption has risen, adding to the price hike. (On Tuesday) the ERC acted to temporarily suspend the operation of the WESM when the system operator or NGCP (National Grid Corp. of the Philippines) declares a red alert,” President Ferdinand R. Marcos, Jr. said in Filipino during a speech at a Labor Day event on Wednesday.

In an order dated April 30, the ERC said WESM trading will be suspended for the Luzon and/or Visayas grid during red alerts based on notices issued by the system operator or NGCP.

WESM is the trading floor for electricity. Under the Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001, the ERC can suspend the operation of the WESM or declare a temporary WESM failure “in cases of national and international security emergencies or natural calamities.”

During the period of market suspension, the ERC said that the administrative price, or the price imposed by the market operator to the trading participants during market suspension or market intervention, will be applied.

If a dispatch interval is subject to both a price mitigation and the administered price, “the lower of the two prices shall apply in the settlement of transactions for such interval,” the ERC said.

“The Commission is working doubly hard to alleviate the impact of El Niño on our power system, and we are finding ways to mitigate the impact of the extremely high demand resulting from the high heat index as these ultimately affect our consumers,” ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta was quoted as saying in a statement.

The ERC said the average spot prices per day increased by 11% in Luzon and by 53% in the Visayas when alert notices were issued due to the high heat index. These increases would have “a significant impact in the consumers’ electricity bill,” it added.

Based on ERC data as of April 25, Luzon grid has been under red alert for 20 hours and 46 minutes and under yellow alert for 57 hours and 50 minutes. There were no yellow and red alerts in Luzon during the same period last year.

The Visayas grid has been under red alert for 24 hours and 14 minutes, and under yellow alert for 46 hours and 40 minutes. During the same period in 2023, the Visayas grid was only under red alert for three hours and 59 minutes.

“This clearly shows that the alert issuances this 2024 are significantly affecting the condition of the power system attributable to the aforementioned reasons,” the ERC said.

With over 100 cities and municipalities already declared a state of calamity due to the extreme heat conditions nationwide, the ERC said it has determined that such a condition is equal or comparable to a natural calamity.

The WESM trading suspension will be lifted “only if the regional available capacity, less actual regional demand, reaches above zero for 24 consecutive hours.”

“We are also reiterating our call for distribution utilities sourcing from the WESM to be proactive in exploring ways to lessen their exposure,” Ms. Dimalanta said in a statement.

“Impact of high prices can also be alleviated by existing programs, such as the Anti Bill Shock Lending Program of the Land Bank of the Philippines, to at least allow consumers to pay through installment the incremental increases in their electricity bill,” she added.

YELLOW ALERTMeanwhile, the Luzon power grid was placed under yellow alert for the 12th time this month after more than 1,000 megawatts (MW) worth of capacities were unavailable to the grid, the NGCP said.

In a statement on Wednesday, the NGCP said a total of 20 power plants were on forced outage in the Luzon grid resulting in 1,409 MW worth of power supply unavailable to the grid.

Of the 20 power plants, four were offline since last year, three between February and March, and 13 have been on forced outage this month.

The grid operator said a yellow alert will be raised in the Luzon power grid from 8-10 p.m.

Yellow alerts are issued when the supply available to the grid falls below a designated safety threshold. If the supply-demand balance deteriorates further, a red alert is declared.

Luzon’s peak demand hit 12,899 MW while the available capacity is 15,026 MW, data from the NGCP said.

In a statement, the Philippine Energy Efficiency Alliance (PE2) said the Philippines’ must reduce a total of 3,340 MW of the peak demand to manage the power supply deficit.

“PE2 believes that our limited power supply capacities can be optimally planned and dispatched if we try to flatten our steep peak demand curves as an initial step. There is so much talk about beefing up our thinning reserves by accelerating the addition of new power plants, but there are no conscious and concerted efforts toward shaving or shifting peak demand toward off-peak periods,” Alexander D. Ablaza, president of PE2, said in a media release.

The group suggested the management of peak demand before deploying new generating and transmission capacities across the main grids to address the country’s insufficient power supply. — Sheldeen Joy Talavera and Ashley Erika O. Jose