Year: 2021

As economic activities continue to ease in, the Independent Electricity Market Operator of the Philippines (IEMOP) assured the public that it will remain steadfast and resilient in its provision of efficient and reliable market service during this time of the year. This includes being on the ground and ensuring constant coordination with its stakeholders and participants as two (2) of the major islands in the country, Visayas and Mindanao, faced the reeling of Typhoon Odette.

In line with its mandate of transparency, IEMOP apprised the media on the impact of the said typhoon vis-à-vis the market situation in Visayas. The Energy Regulatory Commission (ERC) suspended the WESM Operations in Visayas on 1942H of 16 December 2021. The market suspension is still in effect as of writing. Administered Prices (AP) shall be used for the suspended intervals. Currently, the indicative Administered Price for this period is around PhP 4.6/kWh. Real-time data from the System Operator shows a demand of around 833 MW at 10:30 am of 21 December 2021.

Likewise, IEMOP tackled the market operations highlights for the last few months of the year wherein a higher average market amounting to PhP 6.32/kWh[1] was observed due to a thin supply margin brought about by forced and planned outages of major power plants. This recorded a 22.2% or PhP 1.15 increase from the figure last November 2021. However, due to colder weather, demand decreased from 10,379 MW to 9,559 MW or a difference of 820 MW.

The same trend also follows suit for the system and regional peak demands. As of 15 December, the system peak demand was recorded at 12,096 MW – 4.78% or 579 MW lower than that of the previous month. On a larger scale, the annual system peak demand of 13,752 MW increased by 4.34% or around 571 MW. As  for the regional peak demand, Luzon peak demand decreased from 10,550 MW to 9,999 MW (5.51%) similar to the declining movement of the Visayas peak demand from 2,154 MW to 2,135 MW (0.88%) this November and December, respectively.

For the market transactions of the first two (2) months of the last quarter of 2021, the Effective Settlement Spot Price (ESSP) decreased from PhP 6.43/kWh to PhP 5.15/kWh or around 24.8%. In contrast, the total spot percentage increased for this period from 8% to 12.2%. The generation for the November spot transactions was recorded at 7,168 GWh.

In its concluding media briefing for the year 2021, the Market Operator reiterated its commitment of a reliable and continuous WESM operations and stakeholder support. This was emphasized as IEMOP discussed its major accomplishments for the year. Some of which included the launching of the five-minute market through the Enhanced WESM Design and Operations, implementation of the WESM Central Scheduling in Mindanao, preparation for the Reserve Market, and the commencement of the Green Energy Option Program, among others. Updates to these market developments were discussed further in the said venue.

With only a few days remaining for this year, IEMOP commits to powering the Filipino spirit this season to light an even brighter and resilient future for the industry and the entire nation.

[1] Data covers up to 18 December 2021 only.

With just a few days left in 2021, the Independent Electricity Market Operator of the Philippines (IEMOP) remains focused in achieving more milestones for the Philippine Energy industry through the upcoming market developments in its pipeline. This includes the impending integration of Reserves in the WESM, implementation of enhancements to the Retail Competition and Open Access (RCOA) design, conceptualization for the Electricity Forward Alternative Trading System (EFATS), and the much-awaited commencement of the Green Energy Option Program (GEOP) which is set to operate this 03 December.

Likewise, IEMOP adopted to the “new normal” and shifted to digital platforms. This allowed IEMOP to strengthen its relationship with the stakeholders and participants even during the pandemic restrictions. In the recently held Market Participants’ Update (MPU) this 26 November, IEMOP discussed the policies and directives it plans to implement to ensure a brighter chapter for the energy industry.

During the said event, the Market Operator also discussed the highlights for the past months. So far, the registered capacity in the WESM already amounted to 21,344 MW with 437.7 MW coming from the newly established power plants since May 2021[1]. Majority of the supply is still generated from coal power plants but there was a 133.2 MW added capacity coming from renewable energy sources. The increase in the levels of supply as well as the minimal change in demand this November, average rate in WESM decreased to 5.17 PhP/kWh.

Moreover, customer consumption for January to October 2021 has amounted to 67,312 GWh which is higher by 5.40% from that of 2020. The Market Operator also noted that this figure is relatively close to the amount recorded in 2019 which was 67,120 GWh.

As for the market transactions, the Effective Settlement Spot Price (ESSP) increased from 3.41 PhP/kWh in September to 6.43 PhP/kWh in October. The same goes for the total spot percentage which increased from 7.8% to 8.0%. Generation for the October spot transactions was recorded at 6,774 GWh.

IEMOP also presented the new WESM Tax Regime, clarifying the treatment of tax transactions in WESM following the promulgation of the ruling of the Bureau of Internal Review dated 24 August 2021. Updates in the implementation of the five-minute market, highlighting better forecast accuracy, were also presented to the attendees and delegates of the event.

 

[1] WESM Records as of 16 November 2021

In its October media briefing, the Market Operator observed a decrease in supply due to maintenance and forced outages of several generators. In addition, there is also a notable increase in electricity demand, the levels of which are almost the same as the pre-pandemic levels. This demand and supply interaction for the month of October (until 20 October 2021) resulted to a higher average price of 6.75 PhP/kWh compared to that of the September’s average price of 3.30 PhP/kWh.

As a result of the plant outages (forced and planned including the outages of some gas plant units due to Malampaya gas supply restriction), the average supply of 13,376 MW for this month was 6.40% lower than that of the previous month’s 14,290 MW figure. On the other hand, demand for the month of October increased from 9,928 MW to 10,250 MW or around 3.24% or 322 MW.

The same goes for the system peak demand which increased on a month-to-month comparison from 12,481 MW to 12,920 MW. This trend is reflected in the regional peak demands, with the increase in Luzon peak demand by 352 MW (3.36%) from 10,451 MW in September; Visayas peak demand also went up from 2,089 MW to 2,145 MW or around 2.68%.

As for the market transactions for September 2021, the electricity bought from the market was pegged at a lower price Effective Settlement Spot Price (ESSP) of 3.41 PhP/kWh in September compared to the ESSP of 5.13 PhP/kWh in August due to higher supply margin. The total electricity volume bought from the market last September was pegged at 6,857 GWh or 7.8% of the total volume which is lower than the  spot percentage of 8.6% last August 2021.

In continuing its thrust to deliver excellent and world-class market operations service, the Independent Electricity Market Operator of the Philippines (IEMOP) initiated a number of stakeholder engagement activities to discuss the latest market updates and address the concerns of the participants regarding the market operations.

These include the Reserve Market Overview and Training to discuss the impending integration of trading of Reserves or Ancillary Services in the Wholesale Electricity Spot Market (WESM). This month, the Market Operator is also conducting meetings with the major stakeholder organizations through its Kumustahan sessions as a preparation for its Market Participants’ Update (MPU) this November.

Prices continue to drop in the Wholesale Electricity Spot Market (WESM) as the country experiences intermittent rain showers and colder weather as the third quarter of the year comes to a close.

As the August billing settles at an average price of 4.76 PhP/kWh, the Market Operator foresees the prices to drop further this month with the first half of September averaging only 3.10 PhP/kWh[1]. The price drop is attributed to ample supply, mostly from coal power plants, and a decrease in demand from 10,111 MW last August to 9,824 MW in September, or by 2.83%.

However, the system peak demand increased slightly on a month-to-month comparison from 12,272 to 12,481 MW – figures that are relatively near to that of the past year. The regional peak demand for Luzon also increased by 186 MW from the previous’ months record of 10,265 MW; contrary to that of the Visayas grid which decreased by 51 MW from 2,140 MW.

On the other hand, the Effective Settlement Spot Price (ESSP) decreased from 7.12 PhP/kWh in July to 5.13 PhP/kWh in August. This trend has been observed since the month of June given the persisting colder weather conditions. The total spot percentage also decreased for this period by 9.6% to 8.6%. The generation for the August spot transactions was recorded at 6,989 GWh.

Prices in Visayas were also affected by congestion due to the outage of a damaged Cebu-Negros Submarine Cable. Thus, the Energy Regulatory Commission (ERC) issued an order last 20 September 2021, suspending collection of congestion charges. IEMOP already submitted to ERC, for its confirmation, the guidelines to implement the ERC directives.

Meanwhile, the WESM Central Scheduling continues to be implemented in Mindanao. IEMOP noted that there is a generally sufficient supply level to cover and support Mindanao’s demand requirements which decreased during the period of August up to the onset of September.

 

[1] Data covers up to 21 September 2021.

The Independent Electricity Market Operator of the Philippines (IEMOP) observed lower spot prices for August 2021 as the nation experiences intermittent rains and thunderstorms along with the imposition of varying levels of quarantine restrictions. With the July Billing averaging 6.52 PhP/kWh and the onset of August[1] at 5.03 PhP/kWh, the Market Operator noted that the colder weather and implementation of the community quarantine causes the lowering of prices as opposed to summer. There was also an increase in average supply for August in comparison to the previous month by 6.20% or 801 MW.

Likewise, the system peak demand for the month of July amounted to 13,802 MW, lower by 4.87% or 670 MW than that of June. The same goes for the regional peak demand for Luzon of 11,049 MW and Visayas of 2,107 MW which decreased by 552 MW and 44 MW, correspondingly, with the majority of the generation still coming from coal power plants.

The trend also follows suit with the market transactions starting with the Effective Settlement Spot Price (ESSP) which decreased from 7.26 P/kWh for June to 7.20 P/kWh for July. Total spot percentage was also reduced from 10.7% to 9.6% so is the total generation for the July market transactions which was recorded at 6,813 GWh.

During the media briefing, the Market Operator also gave updates on the status of the implementation of the Enhanced WESM Design and Operations (EWDO) which commenced last 26 June 2021. The said enhancement, particularly the New Market Management System (NMMS), greatly improved the market projections in the WESM. Currently, the Enhanced WESM in Luzon and Visayas is under a “Relaxed Dispatch Operations” wherein penalties for non-compliance to dispatch operations are not imposed. The implementation of full compliance to the dispatch operations is still targeted to begin this September.

Furthermore, Mindanao is under the regime of WESM Central Scheduling wherein contracted capacities are being centrally scheduled in the Market Management System. After Central Scheduling, which is initially intended to be completed by 26 August, Mindanao shall also undergo relaxed dispatch operations for three (3) months before the implementation of full compliance to dispatch operations.

[1] Data covers up to 18 August 2021 only.

The power crisis experienced in the Philippines in the 1990s triggered the enactment of RA 9136 or the Electric Power Industry Reform Act (EPIRA). The vertically integrated structure of generation, transmission and in some parts of the country, distribution of electricity, was undertaken by National Power Corporation (NAPOCOR). NAPOCOR suffered from revenue losses due to subsidies and large debts and thus government was no longer able to support the setting up of new capital-intensive power plants.

As a response to this crisis, the Congress and the policy-markets formulated RA 9136 or the Electric Power Industry Reform Act (EPIRA). EPIRA reformed the power industry to allow private investors to put up generation facilities and compete in the business of supplying electricity. This competitive environment under a regime of fairness, transparency, and public accountability was intended to ensure reasonable, if not lower, prices of electricity in the country. The EPIRA also provided for the unbundling of electricity costs and removed subsidies making the cost of electricity very transparent to end-users. Moreover, it enabled end-users to have a choice when it comes to the supply of electricity to their households.

To facilitate the entry of competition into the power industry, EPIRA mandated the establishment of Wholesale Electricity Spot Market (WESM). WESM enabled generating companies to sell their electricity to private distribution utilities and electric cooperatives regardless of a contract between them. It also reduced the barriers to entry for putting up generating plants.

Moreover, WESM gave more flexibility to distribution utilities whether to buy from counterparty generators through a power supply agreement (PSA) or through the spot market. Energy procured through PSA is subject to the approval of the Energy Regulatory Commission (ERC) while those bought from the WESM are driven by real-time interaction of supply and demand. WESM prices are generally low when there is sufficient supply and low demand. However, when the cheaper plants (like coal, geothermal or natural gas pants) become unavailable and demand becomes high (like during summer months), more expensive plants (like diesel plants) set the price, resulting to an increase in market prices.

WESM also provided the framework for the retail competition and open access (RCOA). RCOA enables end-users to have the power of choice from whom to buy their electricity. To date, those end-users with 500 KW demand and up are eligible to participate in RCOA. Ultimately, EPIRA’s goal is to implement RCOA to all household consumers.

At the center of these processes is the Independent Market Operator (IMO). The EPIRA set forth that within one year of commercial operations, the WESM should be operated by an IMO. EPIRA further provided that this IMO must be jointly endorsed

by the DOE and the Electric Power Industry participants. This significant provision ensures that the market regime of the WESM will not be influenced by any market participant. EPIRA intended that competition will not be hampered by the commercial and business interests of the sellers and buyers in the market. Its objective is to ensure that transparency will not be compromised and that the process of determining the electricity price every trading interval will strictly follow the WESM Rules and the methodology approved by the Energy Regulatory Commission (ERC).

In 2006, the WESM went on commercial operations under the autonomous group market operator – Philippine Electricity Market Corporation (PEMC). PEMC was tasked to initially set-up and operate the WESM. PEMC was led by a 15-man board mostly from the stakeholders (generation, transmission, supply, and distribution) and was chaired by the Secretary of the Department of Energy. This arrangement was intended to be temporary until the establishment of the Independent Market Operator.

In 2018, after due consultation with all stakeholders, the Department of Energy (DOE) and the electric power industry participants jointly endorsed the transfer of WESM operation to the Independent Electricity Market Operator of the Philippines (IEMOP). Thus, eleven years after being mandated by EPIRA, the operation of the WESM as finally transferred to an IMO.

Through an independent entity operating WESM, stakeholders and the public are given confidence that there is no conflicting interest in the management of the power market. The IEMOP’s Board of Directors are individuals that are not affiliated with the power industry stakeholders. Hence, the decisions made in the conduct of market operations are pursuant to the best interest of the whole power industry and is not influenced by any market player.

The operations of IEMOP further ensures fairness in Market Operations. An Independent Market Operator, not being affiliated with any of the stakeholders, guaranties that the WESM is operated in a manner that is fair to all stakeholders, regardless of their market share or influence.

Moreover, the IEMOP ensures that WESM is operated in a transparent manner, in accordance with prevailing policies and regulations. All activities and transactions pertaining to the market operations are generally published in the market information website (www.iemop.ph) for transparency. Undeniably, having an Independent Market Operator at the helm of the Philippine WESM will clearly benefit ordinary consumers through its unbiased and competitive operations. Consequently, these benefits will support the country’s objectives towards a robust and sustainable economic growth.

After implementing another milestone in the history of the Wholesale Electricity Spot Market (WESM), the Independent Electricity Market Operator of the Philippines (IEMOP) reported significant improvements in its operations following the commercial operations. The launch of the Enhanced WESM Design in the Luzon, Visayas, and Mindanao grids is pursuant to DOE Department Circular DC2021-06-0015.

The Commercial Operations of the EWDO paved the way for a more precise forecast accuracy wherein the regional demand forecast accuracy (RTD) resulted to as high as 99.21% in Luzon, 98.99% in Visayas, and 98.66% in Mindanao. Through the shift to the five-minute market design, WESM is now up par with the electricity market of other more developed countries such as those of the United States and Australia; thereby, making the Philippine WESM one of the technologically advanced markets in the global industry standards.

In its monthly media briefing, IEMOP also reported the market operations highlights for the month of June[1] which had a lower average market price of 6.53 PhP/kWh compared to May billing which had an average price of 7.66 PhP/kWh. Majority of the generation still came from coal power plants. The onset of the wet season in the country also led to an increase in the contribution of hydro power plants in the generation mix from 3.3% or 248 GWh for the month of May, to 4.2% or 330 GWh for June.

Peak demand for the month of June amounted to 13,752 MW for Luzon and Visayas grids. This is slightly higher than that of May by 0.67% or 92 MW. Likewise, the regional peak demand for Luzon of 11,601 MW was observed to follow an increasing trend coming from last month’s 11,591 MW figure. On the contrary, the regional peak demand for Visayas decreased from 2,177 MW to 2,151 MW, accordingly.

The Effective Settlement Spot Price (ESSP) for the said month also decreased by 12.75% – from 8.31 P/kWh to 7.25 P/kWh. However, the total spot percentage increased from 9.4% to 10.7%. Consequently, the total generation for the June market transactions which was recorded at 7,513 GWh – higher than the previous month’s record of 7,236 GWh.

Additionally, IEMOP gave updates on the launch of WESM in Mindanao with the implementation of WESM Central Scheduling last 29 June 2021. The timeline for the full integration of WESM in Mindanao was also presented. A Relaxed Dispatched Operations for the Mindanao Grid is to start on 26 July to 25 October 2021. Finally, the full compliance to Dispatch Operations will commence on 26 October 2021.

[1] Data covered the period of 01 June to 26 June 2021

The Electric Power Industry Reform Act (EPIRA) envisioned an Independent Market Operator for the Wholesale Electricity Spot Market (WESM). According to the EPIRA , an Independent Market Operator (IMO) should be established one (1) year after the implementation of the WESM. In 2006, the commercial operations of WESM in Luzon commenced. However, it was only in 2018, or twelve (12) years after the WESM implementation, when the Independent Electricity Market Operator of the Philippines (IEMOP) took over the operations of the WESM as the IMO.

While the establishment of the IMO is much overdue, IEMOP was able to accomplish significant feats in its three years of existence. Since 2018, IEMOP was able to successfully operate the WESM with a “very satisfactory” rating in the Market Operations Performance Standards (MOPS). It spearheaded crucial market developments such as the implementation of WESM in Mindanao and the Enhanced WESM Design and Operations which are expected to take off this year. With the leadership of the Department of Energy, IEMOP also actively contributes to the impending implementation of the Reserve Market this year. Moreover, as the Central Registration Body for the Retail Competition and Open Access (RCOA), it also facilitates the effective implementation of RCOA, conduct studies, and provide data-driven recommendations for its development.

IEMOP is also cognizant of existing issues in the energy industry, especially those that can possibly affect the nation’s development. Thus, IEMOP continuously coordinates and communicates with its stakeholders to address their concerns in the electricity market. To proactively participate in identifying long-term solutions to these issues, it conducts exhaustive studies with regard to Capacity Market, Derivatives Market, and Forwards Market. It has also strengthened its energy literacy campaign to provide awareness and relevant data to the public in accordance with its mandate of transparency.

These achievements would not be possible without the hard work of the men and women of IEMOP as well the fervent support of all energy industry participants. Thus, we, at IEMOP, would like to thank everyone who made our three (3) years of existence productive and meaningful. We are looking forward to achieving more milestones with you to create a more responsive and dynamic energy industry for the benefit of all Filipino consumers.

 

*As published in The Daily Tribune on 30 June 2021

The Department of Energy (DOE) issued Department Circular No. 2021-06-0015, declaring the Commercial Operations of the Enhanced WESM Design and Operations (EWDO) on 26 June 2021, in Luzon, Visayas, and Mindanao. This milestone, much like the transition of WESM operations to an Independent Market Operator (IMO), would finally be achieved under the current DOE leadership. The EWDO, which was initially conceived way back in 2013, aims to further enhance competition, transparency, and robustness of the Philippine Wholesale Electricity Spot Market (WESM) which can then lead to more investments in the Philippine power industry.

The transition to a five-minute dispatch and settlement interval from the current one-hour interval would significantly improve the demand forecast and eliminate generation imbalances that could happen in a one-hour trading interval. This would make the grid more secure through the reduced system imbalance while, at the same time, generator trading participants would be able to easily comply with their target schedule.

On the other hand, customer trading participants (e.g. distribution utilities, bulk users, and retail electricity suppliers) would now have a more refined period for their bilateral contracts, thus enabling them to have a more robust option on having their electricity supplied either through their bilateral contracts or through the electricity spot market.

Overall, the efficiencies gained from this transition are expected to eventually benefit the ordinary Filipino through more competitive electricity prices for the distribution utilities and also those who are already participating as Contestable Customers (CCs) under the Retail Competition and Open Access (RCOA).

Another major milestone for the EWDO is the integration of the Mindanao grid into the WESM. After being launched in 2017, the Mindanao WESM would also finally Go-Live under the EWDO.

On midnight June 25, the Independent Electricity Market Operator of the Philippines (IEMOP), the Market Operator of WESM, together with the System Operator (NGCP) and all the generating plants and distribution utilities, would switch the WESM from one-hour trading to a five-minute trading interval. This technological milestone has only been achieved by advanced electricity markets. With the EWDO, WESM, under the operations of IEMOP, would be one of the technologically advanced electricity market operations.

The Independent Electricity Market Operator of the Philippines (IEMOP) noted that  the May 2021 peak demand for electricity was recorded at 13,660 MW – which is 1,263 MW greater than that of the April 2021 values. The same goes for the regional peak demand wherein the Luzon peak demand reported an increase this June – from 11,591 to 11,601 MW – as well as that of Visayas – from 2,151 to 2,177 MW.

Supply on the other hand, was greatly affected by generator outages and deratings. The outages, which reached as high as 2,396 MW and deratings of 4,984 MW, triggered yellow and red alert warnings, particularly on 31 May and 01 June 2021. Market interventions were also called for several intervals by the System Operator, the National Grid Corporation of the Philippines (NGCP), due to Manual Load Dropping as a result of generation deficiency. With the tight supply conditions, the Secondary Price Cap was imposed for 55 and 103 for the months of May and June[1], respectively, as the average price breached the P9/kWh threshold. The Secondary Price Cap is a price-mitigating mechanism imposed when there are persistent high market prices.  This resulted to an Effective Settlement Spot Price (ESSP) for the month of May of 8.31 P/kWh which is double than that of the April 2021 ESSP of 4.04 P/kWh or around 105.69%. Moreover, the total generation for the May market transactions was recorded at 7,236 GWh which is higher than the previous month’s record of 6,818 GWh. Likewise, the spot percentage of the said month increased from 7.7% to 9.6% in comparison to that of April 2021.

Generation mix for the month of May continued to be dominated by coal power plants which generated 56.1% of the supply. This is a slight increase from its generation last month of 54.6%. Likewise, an increase in the generation of oil-based power plants, which are usually dispatched only during peak hours, was observed – from 1.1% to 3.1%. Meanwhile, the generation from natural gas, geothermal, hydro, wind, and solar plants decreased while that of biomass remained consistent coming from the month of April.

On the other hand, for the first twenty (20) days of June 2021, a decreased demand and a slight improvement in supply was observed which reflected a decrease in the resulting market prices with an average of P 6.53/kWh.

IEMOP also announced the Go-Live of the Enhanced WESM Design and Operations (EWDO), or the Five-Minute WESM, on 26 June 2021. For the Luzon and Visayas Market Participants, this entails the implementation of a 5-minute scheduling pricing, and market settlement. However, dispatch compliances will be relaxed for the first three (3) months or until 25 September 2021 in order to provide market participants ample time to adjust to the new trading interval.

Meanwhile, for Mindanao, a WESM Central Scheduling will initially be implemented for one (1) month in order to provide time for some participants to complete the registration process after which a relaxed compliance period of three (3) months will be implemented to enable the Mindanao participants to adjust as well to the market based scheduling and pricing mechanisms.

To mark this historic milestone, IEMOP initiated the “AmpliFIVE” campaign which covers the switchover activities as the Market Participants gear up and switch to the five-minute market.

[1] Data only covers until 20 June 2021.