Regulators are about to take up the results of the probe on power- generation companies (gencos), whose power facilities in Luzon went on forced and unplanned outages from July 25 to August 4 this year, to determine whether anticompetitive behavior was committed.
“The technical team already submitted to us the results, as well as their recommendations. The commission will deliberate the same in the coming days. I will ask the new general counsel of the Energy Regulatory Commission [ERC] to include it on the agenda of the commission’s next meeting,” ERC Chairman Jose Vicente Salazar said in an interview.
The ERC chief said the probe considered parameters such as the reasons for the outages, the resulting spot-market rates and bidding behavior of the gencos. “A determination will also be made on whether there are compelling reasons for the commission to conduct further investigation,” Salazar added.
During the period, 20 power plants simultaneously shut down, mainly because these were on maintenance, on forced outage and others operated on limited capacity. On those days, the National Grid Corp. of the Philippines (NGCP) issued yellow- and red alert notices due to insufficient power reserves.
A yellow alert is issued by NGCP when contingency reserve is less than the capacity of the largest synchronized unit of the grid. In Luzon this is equivalent to 647 megawatts (MW), or one unit of the Sual power plant.
A red alert, meanwhile, means there is severe power deficiency.
From July 25 to August 4, there had been seven yellow alerts and two red alerts raised in the Luzon grid.
Of the 20 plants, eight went on forced outage, while 12 were on scheduled maintenance shutdown. This resulted in the loss of more than 4,000 MW of capacity. Some of these plants were originally scheduled to implement maintenance shutdown during the election period, but were requested by the Department of
Energy (DOE), during the time of former Energy Secretary Zenaida Monsada, to move this after the elections.
Energy Secretary Alfonso G. Cusi has said “postponing planned power-plant outage only complicates or compounds the problem.”
Salazar added that the present inquiry is focused only on whether anticompetitive behavior was committed.
It can be recalled that the ERC required gencos to submit a detailed report on the causes of forced outages. Under ERC Resolution 4, Series of 2015, generating facilities are required to submit a report to the ERC within 48 hours from the occurrence of an unplanned outage.
The ERC also required the gencos to submit the action undertaken and protocols to address these contingencies. Further, the ERC said sustained high prices for a significant period of time may be sufficient ground to further look into the behavior of the players in the spot market.
Salazar said that, as part of the investigation process, the commission conducted technical inspections of the power plants to validate their respective outage events.
“To ensure regular reporting of significant events, such as outages, the commission issued cause orders against several generation companies, asking these entities to explain why they should not be penalized for failure to report these outages,” Salazar added.
Moving forward, the ERC is facilitating the determination of reliability-performance standards, which will be used in monitoring the generating units pursuant to an earlier resolution issued by the commission.
“On the issue of reliability, steps will be undertaken by the ERC, which will hopefully reduce the occurrence of red/yellow alerts through the enhancement of our monitoring mechanism for our outage events, as well as the establishment of mean to sanction unwarranted or unreasonable deviations from the schedule of planned outages by gencos periodically submitted to the system operator. This will most likely be done through a Resolution by the commission en banc,” the ERC chief said.
Through its Grid Management Committee, the ERC is currently gathering necessary data to determine the allowable number of outages by a certain generating unit.
The commission is also preparing the mechanism to ensure that gencos follow their firm commitments under the grid operations and maintenance program to manage the supply condition and, ultimately, the reliability of the grid. This includes the formulation of penalties to be imposed against erring gencos, the ERC chairman explained.
The DOE, for its part, is assessing whether there are enough measures or standards for gencos to ensure their power plants are always in good condition, and are able to meet their obligations to their respective customers.
The agency said there are mechanisms, which are meant to address inefficient power supply and reserves, being studied. These include looking into the provision of replacement power for contracted capacities and the creation of technical audit teams to assess the operations and contracts of gencos and distribution utilities, as well as strengthening the promotion of energy investments to augment the supply of electricity in the country.
“We are keen on improving the power-supply situation in the country. We will strengthen the policies and programs, and we will work with the ERC to ensure that all standards are enforced to ascertain reliable, stable and reasonably priced electricity, because we cannot let the people suffer from power interruptions,” Cusi said.
Also, the DOE would conduct an overall performance audit, or technical audit, for all gencos and distribution facilities.
“The DOE noted the increasing and frequent occurrences of forced and unplanned outages, particularly of large baseload power plants, based on the reports of the NGCP resulting to issuances of yellow- and red-alert notices, which may lead to supply shortfall and possibly rotating brownouts,” it said.
The DOE proposed that their overall performance, including compliance to laws, permits and licenses issued to them, would be evaluated. Likewise, an audit intends to remove bottlenecks and inefficiencies that cause disruptions in the power supply, it added.
Meanwhile, consumer group Citizen Watch called on the ERC to thoroughly investigate what it described as “suspicious” trend of simultaneous outages.
“Nine power plants in Luzon simultaneously shut down for emergency maintenance and several others operated on limited capacity, triggering a sharp increase in the prices of electricity and rolling outages across the region,” said Wilford Wong, Citizen Watch secretary-general.
The group noted that the closures immediately impacted the spot market, where prices surged following thinning supply.
“We are alarmed over this latest round of power-plant inefficiencies,” Wong said, citing similarly suspicious outages and shutdowns in November 2013 that drastically affected supply and consequently drove up rates, to the disadvantage of consumers who will bear the brunt of the increase.
“We reiterate our call for a strict audit of the operational fitness of all existing power-plants, which can serve as an accurate base of what is really the actual and dependable capacity in the grid,” he said.
The group said the ERC must see if there is evidence of cartel-like behavior among the power plant operations. If there is, the government must step in to immediately stop and prosecute the offenders, it said.
According to the Wholesale Electricity Spot Market (WESM) operator, Philippine Electricity Market Corp., power rates did shoot up in August.
It said the Effectice Settlement Spot Price for August stood at P4.17 per kilowatt hour (kWh) as against July’s P3.30 per kWh.
ESSP pertains to the average price paid by customers for energy purchased from the spot market. The impact on consumers would depend on the distribution utility’s exposure.
However, Philip Adviento, PEMC training and communications manager, said this is “relatively lower compared to bilateral contracts.”
The ESSP for August is lower compared to the same period a year ago, which stood at P4.96 per kWh. Last year’s ESSP for July was recorded at P5.59 per KWh.
Also, Manila Electric Co. (Meralco) rates went down during the August supply month, which was reflected in the September electricity bills of consumers. Meralco has said that overall charges from the WESM decreased by P0.32 per kWh.