THE Energy Regulatory Com-mission (ERC) has directed the Philippine Electricity Market Corp. (PEMC) and the Independent Electricity Market Operator of the Philippines Inc. (IEMOP) to suspend the settlement amounts in the reserve market.
The suspension will cover the March billing period and will be in place until the ERC finalizes its evaluation of the Price Determination Methodology (PDM) used by IEMOP, likely in May this year.
It may be recalled that the ERC granted an interim relief in August 2023 for the implementation of the then proposed PDM. The ERC had highlighted the need to assess the outcome of the then-ongoing Trial Operations Program (TOP) for the reserve market, stressing the importance of the audit of the PDM, including findings and recommendations from PEMC and IEMOP for the final evaluation and eventual approval of the proposed software for running the co-optimized market.
The Department of Energy (DOE) issued last January an advisory mandating the full implementation and commercial operation of the reserve market starting January 26, 2024. Subsequently, on February 13, the ERC directed PEMC and IEMOP to submit additional compliances, including the results of the software audit for the system for billing and settlement and the systems for the management of the reserve market.
IEMOP recently reported significant price increases in reserve costs for March compared to February.
This significant price increase will have an impact on the total price of electricity that will be charged to the public.
Considering that PEMC and IEMOP have yet to comply with the ERC’s directives on the submission of the results of the software audit, the commission raised concerns on the reasonableness of such cost increases as well as on the mechanics of co-optimization in light of existing policies and regulations.
The ERC also noted the observation of IEMOP on the high volumes of ancillary services (AS) purchased from the market by the National Grid Corporation of the Philippines (NGCP), as system operator, despite its contracted reserve volumes.
In view of this, the ERC directed the PEMC and IEMOP to suspend the implementation of Section 8, pertaining to the billing and settlement of the PDM.
“The Commission is constrained to direct this suspension at this time. We were initially encouraged by the fact that the reserve market was able to unveil reserve capacities that, for one reason or another, did not contract with or participate in the AS CSP conducted by NGCP.
This meant the capacities are there to cover the system’s reserve requirements. However, we cannot ignore the fact that there are issues arising from the implementation of the system as currently designed that puts to question the resulting rates,” said ERC Chairperson Monalisa Dimalanta.
The ERC is also directing PEMC and IEMOP to submit the audit results of the software so the agency can identify and address issues and immediately resume normal operations of the market.
Dimalanta said the submission of the audit results should not be later than April 15, 2024 so her office could swiftly act on it.