Knowledge is (electric) power
Wednesday, January 25, 2006
By Dan Mariano
LOOK at your electric bill. Have you ever wondered what the breakdown—called unbundling—of the money you hand over to, say, Meralco, every month is all about?
Unbundling is supposed to give consumers an idea where exactly their payments go, such as generation, distribution, systems loss and metering costs. Some customers appreciate this gesture of transparency but most do not really care. Why should they when knowing where their payments go has not made electricity cost any cheaper?
Not anymore, say officials of the Philippine Electricity Market Corp. (PEMC). Knowledge of how electricity is generated, distributed and used amounts to, well, power.
The PEMC is set to kick off soon commercial operations of the wholesale electricity spot market (WESM) as mandated by the Electric Power Industry Reform Act (Epira) of 2001. Don’t let the alphabet soup of acronyms intimidate you because the idea behind WESM isn’t all that complicated.
Speaking at the Kapihan sa Sulo last Saturday the PEMC president Lassi-Matti A. Holopainen explained that electricity will be traded in the spot market like any other commodity. WESM, he said, will make for the more efficient use of electricity as generated by power plants throughout the country. With greater efficiency, consumers benefit from lower electric bills.
Consumers can expect a cut of P1.20 to P1.50 a kilowatt-hour in their electric bill when WESM goes into full swing, said Holopainen, a Cebuano of Finnish extraction.
Functioning like a stock exchange, WESM aims to wean producers, distributors and users of electricity away from the current cost-based regime where a rigid formula—called return on rate base (RORB)—is used to peg the price of electricity. “That formula is based on historical costs, long-term averaging and is fixed by regulators,” Holopainen said. “It is a formula that does not give economic incentives to the industry players and discourages a fair and competitive level playing field.”
And if knowledge about power is itself power, regularly updated information on the true cost of electricity will “prepare us for the day when even households and other retail users of electricity will be able to choose who will supply their electricity and at what price.”
In the initial phase of the new pricing system, electricity distributors and bulk users—like shopping malls, factories and industrial parks—will be able to register both their power demand and price bids in the spot market. “Through WESM, these will be balanced with the available supply and price offers of producers, with a fair market price being determined to everyone’s benefit.”
In addition to efficiency and low rates, Holopainen said, WESM will also reduce the use of filthy fossil fuels for power generation. “This reform goes hand in hand with the gradual but successful shift of the Philippines from its long dependence on high-priced, oil-based power generating plants.
A former energy undersecretary, Holopainen said WESM will further accelerate the shift to cheaper, indigenous and more environment-friendly sources of energy.
In 2001 over 60 percent of the country’s electricity came from coal and oil-powered plants. Cheaper natural gas accounted for just two percent while the rest came from geothermal and hydroelectric resources. The power mix began to change dramatically in 2004 when the Philippines started tapping its huge reserves of natural gas at Malampaya.
Natural gas, geothermal and hydro resources now account for 64 percent of the country’s energy mix. Expensive, filthy oil and coal-fired plants continue to supply a third of our electricity. With WESM, however, the market is expected to veer toward the higher efficiency, lower cost and relative cleanliness of indigenous energy resources.
Last week WESM inaugurated its trading floor in Ortigas, Pasig. Holopainen said: “It will be the nerve center for the real-time trading of electricity among producers like National Power Corp. and the so-called independent power producers [IPPs], distributors such as Manila Electric Co. and local electricity cooperators and bulk consumers like commercial and industrial complexes.”
WESM completed last month operational trials for its market management system, including the simulation of its protocols and procedures for the wholesale spot trading of electricity.
“WESM is good to go following the completion of our system’s Luzon operation trials in mid-December, with the registered participants accounting for more than 10,000 megawatts of generation and 5,000 megawatts of demand from power distributors and industrial and commercial users of electricity,” Holopainen said.
The centerpiece of the WESM trading floor is a trio of wide screen plasma monitors reflecting the various power spot trading components. The screens display in real time the total electricity supply generated and available in the power grids of Luzon, Visayas and Mindanao as fed by Napocor and the various IPPs. They also reflect the total demand for electricity as reported by Meralco, local electric coops and bulk users.
The WESM trading boards will report the hour-to-hour price offers and bids submitted by the various spot market participants. Acting as system operator, National Transmission Corp. (Transco) will then implement a dispatch schedule that matches the offers of power generators with the demand bids of customers. It will also set the spot price for electricity and facilitate the settlement of financial accounts.
Trading in the electricity spot market can also be monitored on the website www.wesm.ph.
“Through our transparent, real-time transactions, WESM will create reliable price signals to assist participants in weighing investment options,” Holopainen said.
posted by philpower @ 6:27 AM,
