PEMC records lowest electricity spot market price in January
The effective settlement spot prices (ESSP) in the wholesale electricity spot market (WESM) hit a record low of P1.90 per kilowatt hour last January, the lowest since 2011, according to Philippine Electricity Market Corp. (PEMC).
ESSP refer to average prices paid by wholesale customers for energy procured in the WESM, the trading floor for buying and selling electricity. PEMC is the operator of WESM.
PEMC said wholesale customers sourced 23 percent of their electricity requirements from the electricity bourse for the January 2017 billing period, the highest exposure of customers since December 2006.
Because of the low ESSP in the spot market, distribution utilities source more power from WESM which in turn affects power bills of consumers through a decrease or offset in the cost of generation charge.
The low spot price and the increased sourcing from WESM is also attributed to mitigating measures put in place to address price spikes such as lowering the offer price cap from P62,000 to P32,000 per megawatt hour and imposition of secondary price cap mechanism.
“The WESM has been an aid to the economic growth of the country and developments in the electric power industry. More than the competition, supply augmentation, investment simulation and advancements that the WESM has contributed in nation-building, the WESM boasts years of integrity through transparency,” Melinda Ocampo, PEMC president, said in a statement.
Ocampo is hopeful the low price in the spot market will prevail throughout the year but stressed that this will depend on traders’ behavior.
Marking a decade of commercial operations, PEMC said the WESM implemented reforms to promote competition in the power industry.
PEMC changed the market rules to reflect the preferential dispatch status for emerging renewable energy (RE) resources, with solar, wind and run-of river hydro resources classified as must dispatch generating units while feed-in-tariff entitled biomass are accorded priority dispatch generating units.
Registered capacity of preferential dispatch resources in the WESM total 1,356.6 megawatts.
Changes to the WESM design such as shortening of dispatch interval and adoption of ex-ante pricing were also completed. These enhancements aim to address market operational audit findings and introduce new features and functionalities, such as simplified compliance reporting process and demand side bidding.
PEMC will continue to implement the financial transmission rights (FTRs) in the market. FTRs are financial instruments that allow market participants to offset potential losses related to the price risk of delivering energy to the grid. FTRs will address the volatility of prices associated with power supply agreements due to transmission congestion costs.
PEMC is also mandate to operationalize the Renewable Energy Certificates Market, which is expected to be a complementary mechanism for the renewables portfolio standards as venue for the trading of RE certificates corresponding to renewable electricity generated.
Likewise, PEMC is conducting studies on electricity derivatives market to assess the legal and technical aspects to implementing a derivatives market, and strategize the phased-in market development appropriate in the local setting, as well as the integration of the spot market in Mindanao amid oversupply in the region.
PEMC said it is the first electricity spot market to be certified by the TUVSUD with ISO 27001: 2013 standard for its continued improvements encouraging efficiency.
It is also set to launch a free mobile application that contains real time data on market prices, demand and generation mix.