‘Red, Yellow Alerts’ Jack Up WESM Prices To P46/kwh

28 June 2012

At the thick of the "red and yellow alert" conditions in the power system last week, load weighted average prices (LWAP) at the Wholesale Electricity Spot Market (WESM) soared to as high as P46 per kilowatt-hour (kwh), based on data issued by market operator Philippine Electricity Market Corporation.

This technically confirmed earlier forecasts that electricity consumers in both Luzon and Visayas grids will suffer increases in their electric bills this July.

The P45 to P46 per kwh high price ranges in the spot market were observed for four days from June 20 to 23, and easing only to P18 per kwh on June 24 - which was a Sunday and generally a "low-consumption day."

On June 20, the highest cleared price was at P46.780 per kwh at 8 p.m. All throughout the day, prices stayed relatively high at P15, P22, P24 and P38.862 per kwh from 12 noon until 11 p.m.

For June 21 when the system operator (SO) formally declared a "yellow alert" condition, the highest spot market price logged was at P45.861 per kwh. For the entire day, the average price was at P17.985 per kwh as the hourly cleared offers during peak demand were swinging from P20 to P44 per kwh.

"The Luzon grid was placed on yellow alert for trading intervals 1000H to 1700H and 1900H to 2100H because of insufficient operating reserves," the WESM report has emphasized.

The condition last June 22 worsened, prompting system operator National Grid Corporation of the Philippines (NGCP) to declare "red alert" condition, and which warranted the scheduling of rotating brownouts.

Power utility firm Manila Electric Company (Meralco) later on advised its customers though that scheduled brownouts were averted because the high demand forecast did not materialize.

The emerging controversy in the industry has been that "demand forecasts were being set too high compared to actual demand." Stakeholders opined that this is the area where adjustments must be made to ensure that conditions of supply tightness in the market are not just contrived.

The highest price recorded Friday was at P46.297 per kwh for Luzon and P45.861 per kwh for Visayas. The average price for the day was at P15.511 per kwh for Luzon; and P16.433 per kwh for Visayas.

Red alert condition was declared, according to WESM, "because of insufficient operating reserves." It added that system ex-ante demand peaked at 8,796 megawatts, while market offers only reached a maximum of 8,660MW.

Saturday somehow offered a "surprising twist" because it sustained a "yellow alert condition" in Luzon grid, despite a seeming expectation of lower demand. In that particular day, spot market prices were still surging past the P46 per kwh level.