A Proposal from Electric Cooperatives:
The Association of Mindanao Electric Cooperatives is having their General Membership Meeting today, February 17, 2017, here in Cagayan De Oro City.
The delegates and guests, mostly from the generating companies, spent the morning on a workshop discussing an alternative electricity market for Mindanao that would address the problem of providing electric power supply to their member-consumers that is adequate, reliable, and at least cost.
The term “alternative” is used to mean an alternative to the “WESM” that is being proposed by the Department of Energy.
An alternative electricity market is needed because the DOE proposal is certain to result in high power rates for consumers, making it impossible for the electric cooperatives to comply with the mandate of the EPIRA to the distribution utility companies to always acquire power supply for their captive customers at least cost.
Apart from which the DOE proposal cannot be implemented until 2020, the expected year of completion by NGCP of the Visayas-Mindanao Interconnection, when it becomes legal and technically possible to integrate Mindanao into the Philippine WESM.
From listening to the participants at the workshop, I got verification of the probable answers to the question as to why the DOE has been trying to impose a WESM in Mindanao that they know to be illegal, technically defective, and will result in high rates for power consumers.
The answers that have been suggested to the mystery of the DOE trying to do harm to Mindanao power consumers by “parachuting” the Philippine WESM to Mindanao before it is legally and technical possible to do that are the following:
1. The San Miguel Consolidated Power Corporation wants the Philippine WESM extended to Mindanao because it is the prerequisite for establishing a Retail Competition and Open Access (RCOA) in which the SMCPC could sell the uncontracted capacity that will be available from their coal power plant in Malita, Davao del Sur.
2. The Aboitiz Power Corporation wants the Philippine WESM to be extended to Mindanao so that they could sell the output of their diesel power plants at the highest bid prices that can attained in a WESM.
Those answers elicit another question: Why is the DOE trying to establish a WESM in Mindanao that is definitely harmful to consumers (in the form of higher rates) but beneficial to generating companies?
Maybe the DOE people who are now conducting public consultations on the illegal WESM can provide the answers during the consultations in Davao City and in Zamboanga City.
The Power Supply Problem of Electric Cooperatives in Mindanao
The power supply problem for which the workshop has been organized (and which is being facilitated by Prof. Rowaldo del Mundo) can be stated as follows:
How can the electric cooperatives supply their member-consumers with peaking power at the least cost?
This is the main problem for which the electric cooperatives are proposing an alternative electricity market that will be part of the solution.
Note that the alternative electricity market is only “part” of the solution, and I would say only a small part. The main solution to the problem is to develop the rules that would govern the dispatching of generating plants by the Mindanao grid System Operator, which is the NGCP, under the Open Access Transmission Service (OATS) rules that currently govern transmission service in the grids owned by the National Transmission Corporation (NTC) in which there is no WESM.
The power supply problem is not concerned with baseload power supply because consumer requirements for baseload power, which is adequate and at least cost, can be addressed by existing rules for bilateral contracting. Neither is the problem one that concerns intermediate power supply, because that also can be addressed under existing bilateral contracts.
A problem that exists concerning baseload and intermediate-load power supplies is that some electric cooperatives are “overcontracted” and others are “undercontracted”.
But this problem can be answered only by prudent contracting, and not by the establishment of an electricity market for the hourly power-supply requirements of the ECs. There is no law that prohibits selling by electric cooperatives of overcontracted capacity to other ECs or to investor-owned DUs or to directly connected consumers.
In the case of sales to other electric cooperatives, however, the EC that buys the capacity should apply to the ERC for approval of the rates to be passed on to consumers.
The application submitted to the ERC should include a description of the least-cost acquisition process that was carried out by the EC that buys the overcontracted capacity.
It is the peak-loading power supply requirement that is problematic because this type of power supply cannot be accurately forecasted and, therefore, cannot be covered by long-term power supply contracts.
Ancillary Services
It was suggested at the workshop this morning that the problem of ancillary services should also be addressed.
But the provision of ancillary services is not a problem in the Mindanao grid for which the electric cooperatives should propose solutions. This is because the NTC and the NGCP have been mandated to provide ancillary services, and the rates that the NGCP should charge for such ancillary services have already been approved by the ERC under the Ancillary Services Cost Recovery Mechanism (AS-CRM), which governs the recovery of the costs incurred by the NGCP for the provision of ancillary services.
The ancillary services to be provided by the NGCP, for which they are authorized to recover costs under the AS-CRM, are the following:
1. Regulating Reserve (Load Following and Frequency Regulation)
2. Spinning Reserve, also called Contingency Reserve
3. Back-up Power, also called Dispatchable Reserve
4. Black-start Capacity
The acquisition of these ancillary services from generating plants are done by the NGCP through Ancillary Services Procurement Agreements (ASPA), which are approved by the ERC, and the costs of acquiring ancillary services is charged to distribution utility companies and directly-connected customers through transmission charges that are billed by the NGCP to the DU, and passed on by the DUs to their customers.
So there is already an existing mechanism for the NGCP to provide ancillary services and to recover the costs for doing so. The electric cooperatives cannot unilaterally change the rules and rates governing ancillary services, so there is no need for the ECs to attend to this problem at this time that they are trying to address the power supply problem.
The problem of transmission congestion in the Mindanao grid is also a problem that can be addressed only by the NGCP, and not one that can be solved by the electric cooperatives.
The Process of Arriving at a Solution to the Peak-Load Power Supply Problem
The workshop this morning, and its continuation into the afternoon, would be concerned with understanding the peak-load power supply problem, proposing the rules that would govern the dispatch of generating plants by the NGCP at all hours of the day, and proposing the rules that would govern load management by the electric cooperatives to ensure that there is adequate power supply for consumers at all peak-load hours of the day.
President Adelmo Laput of the AMRECO PSAGCOR said that the PSAGCOR will collate the suggestions and proposals, and then organize a technical working group (TWG) of the electric cooperatives to refine the suggestions and proposals.
(The Mindanao Coalition of Power Consumers is suggesting that representatives of member-consumers be allowed to participate in the activities of the TWG, so that consumer concerns also will be addressed by the TWG.)
The output of the AMRECO working group will be taken up with the NGCP and with the generating companies, and a set of final rules governing the dispatch of generating plants in the Mindanao grid should be agreed upon by the tripartite group (PSAGCOR, NGCP and the GENCOs), which we will call for now the “New Generation Dispatch Rules”, NGDR.
In the formulation of the NGDR, it will be found that there will be generation dispatch orders for which payment for the generation of power plants are not covered by existing power supply contracts.
In those cases, new contracts will have to be entered into between the ECs and the GENCOs, and applications will have to be submitted to the ERC to pass on to consumers the costs of the power supplies that are not covered by existing contracts.
Provided that it can be shown that acquisition of power supplies has been done at least cost, the EC member-consumers will not object to paying for the costs of the additional generation. It is only after the approval by the ERC of the rates that can be passed on to consumers that the NGDR can be implemented.
The contracting of additional power supplies that are required by the improved and more efficient NGDR is the scope or coverage of the “alternative electricity market” that is used in the title of this paper.
It turns out that the problem of power supplies in Mindanao, for which the DOE has been proposing the sledgehammer solution of a WESM, can be addressed by the small hammer of formulating the NGDR.
The Role of the PSAGCOR
It is envisioned that the PSAGCOR will be the intermediary between the individual electric cooperatives and the NGCP in the dispatching of generating plants to ensure the adequacy power supply for the electric cooperatives at all hours of the day.
The NGCP will communicate with the PSAGCOR and the PSAGCOR will communicate with the electric cooperatives, instead of the NGCP doing communications directly with the individual electric cooperatives as is being done at present.
In effect the PSAGCOR will be acting as the aggregator or the coordinator of the power supplies for all electric cooperatives in Mindanao that are connected to the grid. (Coordinator is the better term to use because an aggregator in the EPIRA is used to refer to the buying and selling of electricity for a group of consumers.)
The PSAGCOR coordinates or facilitates the dispatching by the NGCP of the power supplies for the ECs and also coordinates the load management that is being done by the ECs, including manual load dropping when that becomes necessary.
In addition to this operational function of the PSAGCOR, the PSAGCOR will also do the planning and acquisition of long-term power supply of the electric cooperatives in Mindanao, in the manner that they did for the power supplies that were contracted with the GN Power Corp.
Kudos to the AMRECO, Brickbats for the DOE
President Sergio Dagooc of the AMRECO and President Adelmo Laput of the AMRECO-PSAGCOR, understand the problem of power supplies for the electric cooperatives in Mindanao, and understand the solutions to the problem.
They anticipated the problems a long time ago, and established the PSAGCOR as the instrument of the electric cooperatives for addressing the problems of power supplies for the ECs as soon as the problems turn up.
The people at the DOE who have been trying to “parachute” the WESM into Mindanao do not believe in the capability of the electric cooperatives to provide solutions to their problems. The DOE people are absolutely wrong, as this paper on the proposed solution arrived at by the ECs should show.
The DOE people should have consulted with the Mindanao ECs when the power supply problems were brought to their attention by the generating companies instead of immediately trying to revive the ill-conceived IMEM and calling it a WESM.
But there you are: a DOE that is crookedly bent on solving the problems of the generating companies instead of addressing the problems of the electric cooperatives and their member-consumers.
May God bless the officers of the electric cooperatives in Mindanao.
(Engr. David A. Tauli is the president of the Mindanao Coalition of Power Consumers)
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