Changes in WESM price-setting system OKd

Regulators have approved the streamlining of the price-setting process at the Wholesale Electricity Spot Market (WESM), particularly in shortening price intervals to five minutes from one hour, in a move that is expected to result in lower power costs for consumers.

“The new PDM [price determination methodology] provides amended features with regard to price determination and settlement in the WESM and consolidates the various pricing mechanisms which are currently contained in several issuances of the Commission,” Energy Regulatory Commission (ERC) Chair Agnes Devanadera said in a statement.

The ERC was acting on an application filed by Philippine Electricity Market Corp.

The ERC said the adoption of the enhanced WESM design and operations would provide, among others, a shorter dispatch interval of five minutes which would “result in better pricing signals” because it would instantly reflect the changes in supply and demand.

Also, the regulatory body said a shorter pricing interval would “potentially reduce” the need for frequency regulation reserve which would be beneficial to consumers.

“Projecting possible conditions in the next five minutes will result in a more accurate picture of the actual conditions as compared to projecting the possible market conditions in the next one hour,” Devanadera said. “Since regulating reserves are needed to address the fluctuations in supply and demand, lesser fluctuation brought about by better projection would mean lesser requirements for regulating reserve,” she added. “Also, considering that customers pay for the procurement of regulating reserve, this would translate to lower costs for the customers.”

Besides this, the new scheme also adopts an automatic pricing rerun that provides for a more efficient process to have settlement-ready prices which are produced in real time. Further, the new pricing mechanism is also intended for use in the upcoming commercial operations of WESM in Mindanao. INQ