DOE probes power plants for price surge

By Iris Gonzales, The Philippine Star

Posted at Feb 17 2014 07:55 AM | Updated as of Feb 17 2014 03:55 PM

MANILA, Philippines - The Department of Energy (DOE) is investigating a number of power generators, including the Power Sector Assets and Liabilities Management Corp. (PSALM), for violating rules on trading and dispatch in the electricity spot market during the 30-day maintenance shutdown of the Malampaya natural gas platform, Energy Secretary Carlos Jericho Petilla said Saturday.

He said there were some power plants that traded at the spot market during the period but did not actually dispatch power when they were called to do so, leading to a tightness in supply and pushing prices higher, constituting what is called “anti-competitive behavior.”

This is among the initial findings of the energy department, which is conducting its own investigation on the disputed power rate hike, Petilla said. He declined to name the power generators.

In the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity, anti-competitive behavior is defined as an action that significantly affects prices.

“It appears there were power plants that violated the real time dispatch (RTD) and must-offer rule (MOR),” Petilla said.

These so-called rules require power plants to dispatch power when they are called to do so and fully declare their capacities.

The compliance to RTD and MOR in the WESM is designed to ensure that capacities are made available in the market. These rules ensure energy sufficiency as all available generation capacities are reflected and seen as a measure to curb the uncompetitive behavior in the market, according to the DOE.

“Withholding available generation capacities by not submitting offers or not complying with dispatch schedules are violations of the WESM rules. However, individual power plants may have unique technical considerations explaining its inability to comply with the requirements,” Petilla said.

If generation companies do not declare and offer their full capacity, it may result in tightness in supply, which may consequently push prices up.

Based on his initial findings, at least 2,300 megawatts were declared but not actually offered and dispatched during the disputed period, Petilla said.

“If you violate the RTD and MOR, that’s anti-competitive unless you have a proper explanation for violating the rules,” he said.

During the oral arguments in the Supreme Court on Thursday, Petilla said the PSALM engaged in anti-competitive behavior when it did not dispatch power from the 650-megawatt Malaya Thermal Power Plant when it was called on to do so.

According to Petilla, it’s not only PSALM that did this.

“It’s not only PSALM. There were other plants and we are investigating these plants,” he said without mentioning the power plants.

According to 7.4.3 of the WESM rules, it would be considered as anti-competitive behavior if the power plant physically withholds or refuses to offer to sell or schedule, the maximum available output of reserve to the WESM by a facility available and capable of producing such output or reserve.

This type of conduct may include falsely declaring that a generation facility has been forced out of service or has otherwise become unavailable or has constraints that limit its output or reserve; or operating a generating unit in real time to produce an output level that is less than the system operator’s dispatch instruction.

The erring behavior can be made by economic withholding or submitting of bids for a facility that are unjustifiably high so that the facility output or reserve is not, or will not, be dispatched such that the bid will set the price.

PSALM, the government corporation tasked to privatize state-owned power assets, owns the Malaya plant.

Petilla said he is deferring the decision to the Energy Regulatory Commission (ERC), which is expected to release its own findings, including the energy department’s report on the matter.

PSALM president Emmanuel Ledesma said the technical limitations of the Malaya power plant made it impossible for Malaya to be always traded through the WESM bidding process.

Electricity rates skyrocketed in December last year on the back of a 30-day maintenance shutdown of the Malampaya facility.

The generation charge of power distributor Meralco rose to P9.10 per kilowatt-hour in December from November’s P5.67 per kwh for still unclear reasons.

Meralco has blamed tightness in supply at the spot market as a result of PSALM’s failure to dispatch power from the Malaya facility.

The issue is still the subject of hearings conducted by the Supreme Court and an investigation by the ERC.