Spot power prices fell in July, but relief stays limited

By Francis Allan L. Angelo

MANILA — Wholesale electricity prices fell across all three of the country’s major grids in the July billing period, with the Visayas posting the steepest decline, the Independent Electricity Market Operator of the Philippines, or IEMOP, said.

The system-wide average price at the Wholesale Electricity Spot Market, or WESM, settled at PHP 8.31 per kilowatt-hour, or kWh, down 13.1% from PHP 9.56 per kWh in June.

The billing period covered June 26 to July 25.

WESM is the trading floor where generation companies sell electricity that is not locked into long-term supply contracts, and where distribution utilities buy whatever their contracts do not cover. IEMOP has operated the market since 2018.

The decline matters to ordinary consumers because spot market prices feed directly into the generation charge, the single largest line item on a typical electricity bill.

Distribution utilities and electric cooperatives that buy from WESM pass those costs to end users, so a cheaper July on the spot market generally shows up as lower bills in the following cycle.

The relief is largest, and most needed, in the Visayas. The grid, which supplies Panay, Negros, Cebu, Bohol, Leyte, and Samar, has carried the country’s highest spot prices for months, and its consumers absorbed the sharpest increases in June.

The relief is also partial and conditional. Bilateral contracts, not the spot market, still cover the bulk of electricity purchases, so the pass-through is diluted.

The Visayas grid also remained under repeated yellow and red alerts through July, meaning the price improvement did not resolve the underlying thinness of supply.

“Wholesale electricity prices declined during the July billing period, particularly in the Visayas. Consistent with seasonal demand patterns during rainy months, we are observing a decline in the system demand, while generation availability improved in parts of the Visayas, contributing to lower market prices,” said Isidro E. Cacho Jr., IEMOP vice president for trading operations.

“If current supply, demand, and transmission conditions continue, market prices may remain relatively moderate. However, actual market outcomes will continue to depend on generation availability, electricity demand, and overall system conditions,” he said.

Rains pull demand down

System-wide average supply fell 2.6% to 20,587 megawatts, or MW, while average demand dropped 3.4% to 14,936 MW, reflecting the seasonal reduction in consumption during the rainy months.

Supply margins moved in opposite directions across the regions. The margin in Luzon narrowed by 265 MW, while the Visayas and Mindanao margins widened by 115 MW and 49 MW, respectively.

IEMOP attributed the shifts to outage levels, supply constraints relative to demand, grid alert issuances, and changes in high-voltage direct current, or HVDC, power flows.

Luzon posts the smallest decline

In Luzon, average supply declined 3.9% and average demand fell 3.3%. Supply averaged 15,043 MW and demand averaged 10,764 MW.

Luzon’s average price fell 8.2%, from PHP 7.95 per kWh to PHP 7.30 per kWh, the lowest among the three grids.

The effect on Metro Manila households will be muted. Manila Electric Co., or Meralco, has sourced less than 10% of its overall supply from the Luzon spot market in recent months, which limits how much of the decline reaches its customers.

Several large generating units in Luzon went on forced and planned outage during the period, with combined unavailable capacity reaching 777 MW.

The highest average regional price was recorded on July 7 at PHP 22.04 per kWh.

Visayas leads, but alerts persist

In the Visayas, average supply rose 3.6% to 2,260 MW while average demand declined 4.0% to 2,080 MW, according to IEMOP data.

The region’s average price fell 21.9%, from PHP 14.46 per kWh to PHP 11.29 per kWh.

The wider margin was still not enough to cover nighttime peak requirements, and the System Operator, the National Grid Corporation of the Philippines, continued to issue yellow and red alerts.

A yellow alert is raised when operating reserves fall below the required level. A red alert follows when available supply can no longer cover demand plus the reserve requirement, the point at which rotational outages become possible.

The Visayas grid has been under a series of yellow alerts since May.

The System Operator also declared Administered Prices on July 8 because of generation deficiencies.

Conditions nonetheless improved over the month as several plants returned from forced outage toward the latter part of the billing period.

Imported power eases the squeeze

The Visayas continued to draw imported power from Luzon and Mindanao through the Leyte-Luzon and Mindanao-Visayas HVDC interconnections, and operating conditions on both links improved during July.

Better interconnection flows meant longer stretches when prices stayed aligned across the connected grids, giving the Visayas greater access to cheaper generation from its neighbors.

The Leyte-Luzon link ran at its 250 MW maximum transfer limit or under security-limited conditions for 40.9% of the billing period, down from 60.9% in June. The Mindanao-Visayas link ran at its 450 MW maximum for 26.9% of the period, against 39.4% previously.

Transfers through the Leyte-Luzon link were frequently held at security-limited levels to prevent overloading of the Leyte-Cebu corridor, which restricted the flow of lower-cost Luzon generation into the Visayas and produced price separation between the grids.

Even so, periods without price separation expanded. Unconstrained operation on the Luzon-Visayas interconnection rose to 53.6% of the billing period from 31.1% in June, while the Mindanao-Visayas interconnection improved to 73.1% from 60.7%.

Mindanao tracks the decline

In Mindanao, average supply eased 0.3% to 3,283 MW and average demand fell 2.9% to 2,091 MW.

The average price dropped 18.5%, from PHP 12.75 per kWh to PHP 10.39 per kWh.

The highest average regional price in Mindanao was recorded on July 15 at PHP 15.19 per kWh, when generating units with combined capacity of 474 MW were on forced outage.

Fewer price interventions

Pricing interventions, which regulators apply when market prices cannot be relied on, eased compared with June.

Administered Pricing was imposed for only 0.61% of intervals in the Visayas.

The Price Substitution Methodology was applied for 17.62% of intervals in Luzon and 17.48% each in the Visayas and Mindanao, reflecting continued network congestion that produced extreme price separation.

The Secondary Price Cap was triggered for 2.84% of intervals in Luzon, 2.73% in the Visayas, and 2.91% in Mindanao, well below June levels and an indication of fewer episodes of sustained high prices.

Normal pricing conditions prevailed for roughly 74% of the billing period across all three grids.

Outages stay widespread

Outages remained widespread. Luzon recorded a peak daily cumulative forced outage of 3,349 MW, mostly from hydro, coal, and natural gas plants, plus 1,314 MW of planned outages.

The Visayas recorded a peak daily cumulative forced outage of 975 MW, mostly coal and geothermal, with 95 MW of planned geothermal outages. The scale of those outages is why the region leaned so heavily on imported power to meet local demand.

Mindanao posted a peak daily cumulative forced outage of 743 MW and 611 MW of planned outages from coal and hydro plants.

Coal share rises, solar gains

Renewable energy accounted for 22% of total generation in July.

Coal’s share rose to 59.1% from 57.9%, while natural gas slipped to 17.0% from 18.0% and oil-based generation fell to 1.4% from 2.2%.

Solar generation climbed to 6.9% from 6.2% on better daytime conditions, and hydro edged up to 6.3% from 6.2%. Geothermal eased to 7.5% from 7.7%, and wind held at 0.5%.

Pumped storage hydro stayed at 0.7% and battery energy storage systems at 0.2%.

Spot market volume slipped to 14.6% of total traded quantity from 15.1% in June, with bilateral contracts still accounting for 85.4% of traded volume. That ratio is the arithmetic behind the muted consumer relief, because the spot market moves only a small share of the electricity actually delivered.

Total trading value fell to PHP 28.07 billion from PHP 36.43 billion, pulled down by the lower volumes and by a drop in the Effective Spot Settlement Price to PHP 9.47 per kWh from PHP 11.30 per kWh.

Reserve prices climb in Luzon

Reserve prices in Luzon rose across every category, driven by smaller offered quantities and heavier reliance on the reserve market.

Regulation Down prices climbed 15.2% and Regulation Up prices rose 11.3%.

Contingency Reserve prices jumped 63.5% on lower offers, higher requirements, and a larger share of reserve procurement relative to total generation. Dispatchable Reserve prices surged 75.7% for similar reasons.

Mixed results in Visayas, Mindanao

Movements in the Visayas were mixed. Regulation Down and Regulation Up prices rose 8.4% and 14.5%, respectively, on higher reserve market contributions and increased trading activity.

Contingency Reserve prices in the region fell 24.8% as offered and contracted quantities increased and scheduling adequacy improved, with the schedule-to-requirement ratio rising from 93% to 100%.

Dispatchable Reserve prices were nearly flat, down 2.8%.

Reserve market share in the Visayas rose to 67% from 56%.

In Mindanao, Regulation Down and Regulation Up prices rose 19.7% and 6.9%, while Contingency Reserve prices fell 23.7% and Dispatchable Reserve prices dropped 73.9%, the steepest decline recorded in any reserve category.

Contracted quantities covered 86% of total scheduled reserves in Mindanao, cushioning price swings in the region.