Asian Energy Advisors

There are two ways to do what we-in-the-industry call “security constrained economic dispatch.” That is, how do we optimally allocate the electric demand among all of our generators to achieve the least cost supply (minimize the fuel costs) in each hour without overloading any transmission facilities and such that we can withstand certain sudden failures without having that failure cascade throughout the system causing a blackout.

First, there is the way we did it under the old Napocor – a single entity analytically determines how best to do this – behind closed doors, essentially. Napocor knew the fuel price at each plant and they could allocate the load to achieve the lowest cost … or not. Which was part of the problem. Some didn’t trust Napocor to do that.

The second way brings more transparency to the process and allows the market to determine the pricing at each generator. These prices are then converted into a “dispatch” or allocation among generators using an open formulaic approach that has been publicly vetted and approved by ERC. It’s what we’re using under WESM.

In the old days, when something happened, like the transformer failure in Bulacan last month, the cost impact to the system was the same as it is today – Napocor would have to re-dispatch generation to other higher cost plants in order to not overload the remaining transmission. But those “price spikes” which were actually “cost spikes” occurred without the public really being aware of it. They might have seen a newspaper article about the transformer outage – but cost consequences were not made transparent …. until a couple of months later when Napocor would pass on the higher costs through the fuel adjustment.

Today – we have a direct and immediately observable link between the outage and prices.

This is another aspect of EPIRA. It brings more transparency to the operation of the power system – enabling everyone affected to be more involved. The man on the street can now see why we may not want our transmission company to defer maintenance or continue using old and unreliable equipment. We now see why we might want our transmission company to spend money on spares. We now see the impact of not having built the 230-kV San Manuel-Concepcion-Mexico transmission line sooner.

WESM is providing us the ammunition to question and hold Transco accountable for a host of items. WESM is providing us the ammunition to enter into the debate of where new generation is located. WESM let us know what the impact was of Shell’s interrupting the Malampaya supply for a month for their own inspections. WESM provides us the ammunition to hold IPPs owners accountable for forced and scheduled outages, especially those occurring during the dry season.

WESM, in many ways, is doing what we wanted it to do – to make transparent the impact of decisions in the industry so that we can better hold accountable those that are making the decisions – and do it faster. Speed is important.

It this respect, WESM is definitely working.