ERC Looks Into GenCos’ Plant Outages and High WESM Prices

ERC Looks Into GenCos' Plant Outages and High WESM Prices

Amidst the ongoing rotational brownouts implemented by the National Grid Corporation of the Philippines (NGCP) in the Luzon grid, the Energy Regulatory Commission (ERC) has been looking into the Generation Companies' unplanned outages and the recent spikes in the Wholesale Electricity Spot Market (WESM) prices.

'We have been monitoring the activities of the Generation Companies, especially those that underwent unplanned outages, that caused the thinning of power supply in the Luzon Grid. This was aggravated by the increased demand for electricity due to warmer temperatures. As a consequence, there has been sustained high prices in the WESM', ERC Chairperson and CEO Agnes VST Devanadera averred.

ERC has sent Notices of Non-Compliance to Generation Companies (GenCos) to explain the incurred cumulative unplanned outages beyond the maximum allowable unplanned outage days for the year 2021. The ERC, in its Resolution No. 10, Series of 2020 entitled 'A Resolution Adopting the Interim Reliability Performance Indices and Equivalent Outage Days Per Year of Generating Units', has set the cap for annual unplanned outages per generating plant technology.

Likewise, the ERC has identified generation companies that are not compliant with the reporting requirements under ERC Resolution No. 4, Series of 2015. Out of the 2,083 incidents on unplanned outages during the period of January to April 2021, 1,288 incidents were reported. On the other hand, for the 236 incidents on the planned outages, 220 were reported. The Commission will be issuing Show Cause Orders (SCOs) to the GenCos who did not comply with the reporting requirements of ERC.

Meanwhile, the ERC, in April 2021, has created a Task Force that will conduct a study on the power plant outages and resulting high prices in the WESM. The Task Force has already identified the generation plants that will be prioritized for the conduct of technical inspection to verify the outages, including, but not limited to, the actions undertaken by the power plants to get back on line. Also, the ongoing study focuses on analyzing the hourly market data and correlating different factors in the WESM through: (1) Assessing the strong determinants of the increase in prices leading to the imposition of the Secondary Price Cap (SPC); (2) Identifying the contributors to the unutilized capacities in the market; (3) Determining the supply-demand factors leading to the diminishing supply margin; (4) Identifying the compliance of the plants to their outage reportorial compliance and their reliability indices; and (5) Identifying the trading pattern in the market.

With the imposition of the Secondary Price Cap (SPC), which is a mitigating measure promulgated by the Commission to mitigate sustained high prices in the WESM, average prices from May 4 to May 31, 2021 was recorded at PhP7,841/MWh. This could have been PhP11,263/MWh or 44% higher without the SPC.

'The power supply shortage during the summer months has been a perennial problem, and the regulator has been monitoring the situation from day one. There are existing rules and mechanisms in place on how to mitigate the impact to consumers. Thus, the stakeholders must be responsible in managing their operations efficiently and sensitive enough of the implications of planned or unplanned outages. The Commission has been undertaking all the necessary efforts to help mitigate, if not totally address this recurring challenge', ERC Chair Devanadera concluded.

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