power and water

WESM to suspend operations during red alerts as power rates soar amid heat

Ralf Rivas

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WESM to suspend operations during red alerts as power rates soar amid heat

ENERGY. Power lines and electricity meters.

LeAnne Jazul/Rappler

The Energy Regulatory Commission says average electricity prices have increased alongside spikes in heat index levels

MANILA, Philippines – The Wholesale Electricity Spot Market (WESM) is temporarily stopping operations in Luzon and the Visayas during red alerts in a bid to curb rising power rates.

This move stems from an Energy Regulatory Commission (ERC) order issued Tuesday, April 30.

Electricity prices sold at WESM have gone up in recent days due to an increase in demand owing to the excessive heat.

The ERC also ruled that the WESM suspension should be lifted only if the regional available capacity, less actual regional demand, reaches above zero for 24 consecutive hours. 

What is WESM?

WESM is a platform where electricity is traded among market participants in a competitive and transparent manner. It serves as a marketplace where generators and retailers buy and sell electricity in real-time or through future contracts.

During periods of tight supply, the demand for electricity often exceeds the available supply, causing prices to spike significantly in the spot market. By suspending WESM operations, the ERC can stabilize prices, preventing them from reaching excessively high levels due to scarcity.

In times of high demand, electricity generators may struggle to meet the increased load. As a result, the available supply becomes limited relative to demand.

Scarcity of supply leads to higher prices as buyers are willing to pay more to secure the electricity they need.

High prices in the spot market can have implications for consumers, particularly those on variable pricing contracts or those exposed to wholesale market rates. Electricity retailers may pass on the higher costs to consumers through increased retail electricity prices, leading to higher bills for end-users.

What compelled the ERC to issue its order?

The ERC has the power to suspend WESM operations or declare a temporary failure in cases of national security emergencies or natural calamities.

Data from the ERC showed that the significant increase in demand and power plant outages have thinned supply and reserves since April 16.

Figures also showed that when high heat index levels were recorded and alert notices were issued, the average prices per day increased by an average of 11% in Luzon and 53% in the Visayas, which would have a significant impact on consumers’ electricity bills.

“The commission is working doubly hard to alleviate the impact of El Niño on our power system, and we are finding ways to mitigate the impact of the extremely high demand resulting from the high heat index as these ultimately affect our consumers,” ERC Chairperson Monalisa Dimalanta said. 

“We are also reiterating our call for distribution utilities sourcing from the WESM to be proactive in exploring ways to lessen their exposure. Impact of high prices can also be alleviated by existing programs, such as the anti-bill shock lending program of the Land Bank of the Philippines, to at least allow consumers to pay through installment the incremental increases in their electricity bill,” she added. – Rappler.com

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.