Module 1: WESM Fundamentals
1 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Topic Outline WESM Fundamentals Establishment of the WESM Features of the WESM WESM Structure Membership and Participation in the WESM
2
Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Electricity Industry • Generation
3 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Electric Power Industry Structure MONOPOLY (Pre-EPIRA) IPPs
NPC GenCo
NPC GenCo
IPPs
NPC
DU
EC
Direct
Customers
DU
Generation – NPC, IPPs (IPPs - wholesale contract with NPC and some distribution companies) Transmission – NPC Distribution and supply – distribution utilities, electric cooperatives, NPC
4 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Electric Power Industry Structure NEW STRUCTURE - EPIRA IPP
IPP
IPP
IPP
WESM
Transmission
DU
Supplier
Direct
Customers
S O
EC
Competitive generation Regulated transmission and distribution Open access to high voltage wires Open access to distribution networks Wholesale electricity spot market (WESM) Competitive retail 5 market
Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
New Industry Structure • Generation – Competitive; privatized
• Transmission – Regulated; privatized – Includes systems operations functions
• Distribution – Regulated; privately-owned & electric cooperatives
• Retail/Supply – Competitive
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Features of Electricity • Electricity cannot be economically stored in large quantities. – All electricity has to be generated when needed. – Demand for electricity over the day is highly variable.
• Electricity takes the path of least resistance. – Physical flow of electricity cannot be traced. Thus, it is not physically possible to determine or even direct where the electricity generated by one power plant goes. Sally Hunt: Making Competition Work in Electricity (2002)
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Features of Electricity • Transmission of power over the network is subject to a complex series of physical interactions. – What happens in one part of the system affects conditions elsewhere in the system. Ancillary services are necessary to ensure system reliability and security.
• Electricity travels at the speed of light. – Each second, output has to be precisely matched to use. Electricity being generated at any given time equals actual demand and transmission losses. Sally Hunt: Making Competition Work in Electricity (2002)8 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Implications
Scheduling of electricity generation to meet actual demand is done centrally in order to ensure stability and security of the power system.
There is a need for short-term (i.e., dayahead, on-the-day or real time) coordination between generation and transmission. 9 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Implementation: Timeline Electric Power Industry Reform Act (EPIRA) (RA 9136)
EPIRA Implementin g Rules and Regulation (IRR)
Philippine Electricity Market Corporation (PEMC) (Nov. 18, 2003)
(June 2001)
WESM Market Management System (MMS) Project
WESM Trial Operations Program
Luzon WESM Commercial Operations
Visayas WESM Commercial Operations
(June 26, 2006)
(Dec. 26, 2010)
(March 2004)
Philippine Grid Code
WESM Rules
(December 2001)
(June 2002)
2001
2002
2003
2004
2005
2006
2010
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Topic Outline WESM Fundamentals Establishment of the WESM Features of the WESM WESM Structure Membership and Participation in the WESM
11
Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Legal Basis – WESM Establishment EPIRA Sec. 30: Wholesale Electricity Spot Market (WESM)
Within one (1) year from the effectivity of this Act, the DOE shall establish a wholesale electricity spot market composed of the wholesale electricity spot market participants. The market shall provide the mechanism for identifying and setting the price of actual variations from the quantities transacted under contracts between sellers and purchasers of electricity.
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Legal Basis-WESM Establishment Section 30, RA 9136 Said rules shall provide, among others, procedures for:
•
Establishing the merit order dispatch instructions for each time period Determining the market clearing price for each time period; Administering the market Prescribing guidelines for the market operation in system emergencies; and Amending the rules. The wholesale electricity spot market shall be implemented by a market operator in accordance with the wholesale electricity spot market rules. 13 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Legal Basis-WESM Establishment Section 30, RA 9136 (“Electric Power Industry Reform Act of 2001” or EPIRA)
Subject to the compliance with membership criteria, all generating companies, distribution utilities, suppliers, bulk consumers/end users and other similar entities authorized by the ERC shall be eligible to become members of the wholesale electricity spot market.
The cost of administering and operating the wholesale electricity spot market shall be recovered by the market operator through a charge imposed on all market members: Provided: That such charge shall be filed with and approved by the ERC.
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Legal Basis-Related Provisions TRANSMISSION Section 9 (e), RA 9136
Subject to technical constraints, the grid operator of the TRANSCO shall provide central dispatch of all generation facilities connected, directly or indirectly, to the transmission system in accordance with the dispatch schedule submitted by the market operator, taking into account outstanding bilateral contracts
Section 21, RA 9136 – Transco privatization
The buyer/concessionaire shall be responsible for the improvement, expansion, operation and/or maintenance of its transmission assets and the operation of any related business. 15 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Legal Basis-Related Provisions GENERATION Section 6, RA 9136
Generation of electric power, a business affected with public interest, shall be competitive and open.
Upon implementation of retail competition and open access, the prices charged by a generation company for the supply of electricity shall not be subject to regulation by ERC except as otherwise provided in this Act. 16 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Legal Basis - Summary
Provides mechanisms and rules for: Pricing of electricity not covered by bilateral power supply contracts Determining centralized merit order dispatch instructions to all generation facilities, to be implemented by the grid/system operator
Composed of wholesale electricity spot market participants, incl. generation companies, distribution companies, suppliers, bulk end users/consumers, & other similar entities authorized by the ERC Administered in accordance with market rules Administered by a market operator 17 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Topic Outline WESM Fundamentals Establishment of the WESM Features of the WESM WESM Structure Membership and Participation in the WESM 18
Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
General Features WESM as a venue for “trading” of electricity Centralized scheduling generation and supply of electricity, including those covered by supply contracts
Determining prices of un-contracted quantities (i.e., spot market transactions)
Settlement of spot market transactions (billing, payment and collections)
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General Features WESM is a real-time energy market. Generation schedules to meet customer demand or requirements for each hour of the day are determined an hour ahead. WESM is a mandatory market. All persons or entities connected to the grid are required to become members of the WESM. Failure to register is a ground for disconnection from the grid.
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General Features WESM operates in Luzon and Visayas.
Commercial operations commenced in Luzon on 26 June 2006 and in the Visayas on 26 December 2010.
WESM operates as a single market, and this is possible as the grids are connected through the Leyte-Luzon HVDC link.
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Philippine Transmission System
Luzon: 230 kiloVolt and 500 kiloVolt backbone transmission System
-Leyte-Cebu AC submarine cable link -(2x200 MW)
- Negros-Panay AC submarine cable link -(100 MW)
-Cebu-Negros AC submarine cable link -(2x100 MW)
Leyte-Luzon HVDC link: Interconnects Luzon and Visayas Transmission System Visayas: -138 kiloVolt and 230 kiloVolt (Cebu Only) backbone transmission System -Leyte-Bohol AC submarine cable link (100 MW)
Mindanao: 138 kiloVolt and 230 kiloVolt backbone transmission System
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General Features • WESM is administered by the Philippine Electricity Market Corporation (PEMC).
23 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Topic Outline WESM Fundamentals Establishment of the WESM Features of the WESM WESM Structure Membership and Participation in the WESM
24
Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Market Structure Participation
Trading Participants (Generation Companies & Customers) Ancillary Service Providers
Operations/Services
Market Operator (PEMC) Systems Operator (NGCP) Network Service Provider (NGCP and Dus) Metering Services Provider (NGCP)
Governance and Regulation
PEM Board, WESM Governance Committees and PEMC governance units Department of Energy Energy Regulatory Commission 25 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Operations/Services Philippine Electricity Market Corporation (PEMC)
Serves as autonomous group market operator of the WESM Board of Directors serves as the Philippine Electricity Market Board. Board is chaired by the Philippine Energy Secretary and is composed of representatives from the power industry sectors and independent members.
National Grid Corporation of the Philippines (NGCP)
Private corporation awarded concession to operate and maintain the Philippine transmission system. Serves as Network Service Provider, System Operator and wholesale Metering Services Provider – all functions assumed from the National Transmission Corporation. 26 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Governance Philippine Electricity Market Board WESM Governance Committees
Rules Change Market Surveillance Technical PEM Auditor Dispute Resolution
PEMC Units
Market Assessment Group Enforcement and Compliance Office
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Policy and Regulation Department of Energy (DOE)
Policy making and planning Establishment of the WESM Promulgation of the WESM Rules and its amendments DOE Secretary serves as the Chairman of the Philippine Electricity Market Board
Energy Regulatory Commission
Pricing Competition Enforcement of the WESM Rules Licensing/authorization of market participants 28 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Market Structure Oversight Regulation
DOE
ERC
•WESM Establishment •Policy making •Planning
•Enforcement •Pricing •Competition
Self-Governance & Operations PEM Board
PEM Auditor Rule Change Committee Dispute Resolution Market Surveillance Committee
PEMC Internal Market Operator
Market Assessment Group
Enforcement and Compliance
Technical Committee
WESM Members Generators/ A/S Providers
Network Service Providers (NGCP & DUs)
Suppliers/ Aggregators
Customers
29 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Transmission
Market Operator
Customers
Generation Companies
Market Structure - Transactions
System Operator Metering Services Provider
Electricity flows Information flows Money flows 30 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Market Documents Structure With WESM members and trading participants WESM Rules WESM Price Determination Methodology and other ERC-approved pricing and settlement methodologies Market manuals Market Participation Agreement With System Operator Philippine Grid Code WESM Rules WESM Dispatch Protocol; System Security and Reliability Guidelines, Management of Must Run Units, Emergency Procedures Other market manuals With Metering Services Provider WESM Rules WESM Manual: Metering Standards Other market manuals 31 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Topic Outline WESM Fundamentals Establishment of the WESM Features of the WESM WESM Structure Membership and Participation in the WESM
32
Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Membership Categories Trading Participants
Generation Companies Customers (Distribution Utilities, Bulk Users, Suppliers or Aggregators)
Service Providers
System Operator Network Service Providers Metering Services Providers Ancillary Services Providers
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Participation Trading Participants
Generation Companies Customers (Distribution Utilities, Bulk Users, Suppliers or Aggregators)
Ancillary Service Providers (only upon commencement of reserve market)
Generation Companies Customers (Interruptible Load)
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Participation Direct Members
Transacts (sells or buys) in the WESM directly Compliant with technical and commercial requirements and membership criteria
Indirect Members
Transacts in the WESM through a Direct WESM Member (i.e., counterparty) Compliant with technical requirement and membership criteria, but commercial obligations are assumed by its Direct Member counterparty. 35 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Participation
Spot market transactions of Direct and Indirect members are scheduled, priced and calculated following the same methodologies and procedures.
Transactions of Indirect Members are billed to and paid for by their nominated Direct Member counterparties.
Most Indirect Members are customers and their counterparties may be a generator or aggregator/supplier.
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Membership Criteria & Requirements Criteria
Resident in or permanently established in the Philippines Not under external administration (e.g., liquidation, rehabilitation) Not immune from suit; can sue and be sued in the Philippines Satisfies prudential requirements
Requirements
Technical: remote terminal unit, WESM-compliant revenue metering facilities, communication facilities (phone, fax, email and internet connection) Legal: with licenses or franchises (e.g., Certificate of Compliance for generators); corporate and business registration 37 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
Registration Process Application Submission of requirements Evaluation by PEMC Approval/disapproval of application If disapproved, report to ERC and DOE; applicant may submit dispute to the WESM Dispute Resolution Administrator. Post-registration changes Continuing compliance with registration requirements and criteria Ensure regular renewal of Certificates of Compliance or franchises. Post registration changes that must be notified to PEMC – Change in registered capacities (Pmax, Pmin, ramp rates) – subject to approval Changes in contact persons List of power supply contract customers/counterparties 38 Philippine Electricity Market Corporation (PEMC) Copyright © 2011 by Philippine Electricity Market Corporation
THANK YOU VERY MUCH
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