Energy Secretary Raphael Lotilla wants interim price guidelines to be in place in the Reserve Market cap to protect consumers from volatilities that could escalate the cost of reserves.
Lotilla said in an advisory the Department of Energy instructed the market operator, the Independent Electricity Market Operator of the Philippines (IEMOP), and the Philippine Electricity Market Corp., the governance arm of the Wholesale Electricity Spot Market, to enforce interim pricing guidelines for the reserves market.
“These additional guidelines shall be applied immediately, starting from the February 2024 billing period until the new guidelines are promulgated by the Energy Regulatory Commission. The Market Operator is further directed to apply for the ERC’s approval of all necessary mitigating measures for the Reserve Market,” Lotilla said.
John Paul Castro, from the DOE Electric Power Industry Management Bureau, explained that the advisory on interim pricing for reserves aims to shield consumers from an exceptionally high cost of reserves in specific scenarios.
Robinson Descanzo, chief operating officer of IEMOP, said they are in the process of submitting a filing with the ERC on the secondary price cap to cover the Reserve Market. In compliance with the DOE advisory, IEMOP will write a letter to the ERC concerning the Secondary Price Cap (SPC).
The Reserve Market commenced full commercial operations on Jan. 26, 2024, and on Jan. 28, 2024, IEMOP submitted the results to the DOE.
IEMOP noted observations on reserve prices at the Reserve Market, allowing power generation companies to offer and sell without an Ancillary Service Procurement Agreement (ASPA) with the National Grid Corp. of the Philippines (NGCP) if they have generating capacity/units capable of providing ancillary services (AS).
Lotilla said the full commercial operations of the Reserve Market would optimize the dispatch of all available capacities by co-optimizing the capacity and price offers for energy and reserve. This optimization ensures that the required levels for both services are consistently met.
Reserves, commonly referred to as ancillary services (AS), are essential services for maintaining balance in the power system to ensure normal frequency and voltage levels in response to demand changes, variability of renewable energy, and possible loss of a large generating unit.
The Reserve Market, now integrated into the Wholesale Electricity Spot Market (WESM), the trading floor of electricity, aims to co-optimize energy and reserves. This integration may lead to optimal schedules and prices for energy and reserve requirements, fostering competition and affordability while ensuring grid security and reliability.
The DOE said the successful implementation of the Reserve Market aligns with the President’s 8-point agenda, primarily in providing investment opportunities for generation companies, supporting infrastructure development and creating potential for local employment.
