June WESM prices rise to P9.01/kWh amid thin supply

THE Independent Electricity Market Operator of the Philippines (IEMOP) said the Wholesale Electricity Spot Market (WESM) price averaged P9.01 per kilowatt hour (kWh) in June, up from P6.42 a month earlier, due to thinning supply.

“WESM is… largely dependent on the supply-demand situation and in our presentation earlier we have shown you na nagkaroon po tayo ng (that there was a) decrease in terms of the supply margin because of forced and planned outages (during the) June billing period,” IEMOP Corporate Communications OIC Manager Josell F. Co said.

WESM trades electricity not otherwise committed to power distributors and is tapped in the event these distributors experience a shortfall in their contracted power. The spot price charged to these buyers is typically higher than the power supplied under long-term contracts. A rising WESM price indicates a tightening in the market for contingent power, and points to underlying problems in the market for contracted power.

IEMOP, in an online media briefing on Wednesday, said that in the May 26 to June 25 period, it recorded average supply of 15,214 megawatts (MW), average demand of 11,325 MW and an average supply margin of 3,889 MW.

Month on month, average supply dropped by 192 MW or 1.25%, average demand rose 66 MW or 0.59% while the supply margin decreased 258 MW or 6.22%.

Aside from thinning supply, IEMOP also noted the rise in prices of fuels such as oil, coal and liquefied natural gas, which drove the spot price beyond the P9 mark.

“As a result, the Secondary Price Cap Mechanism (SPC), which was set in place to protect consumers against sustained high WESM prices, was also applied 35.17% of the time in the June billing month,” the company said in a statement.

Recently, Nord Stream 1, the biggest single pipeline carrying Russian gas to Germany, began annual maintenance on Monday, with deliveries scheduled to halt for 10 days, tightening the gas market.

IEMOP’s Head of Corporate Strategy and Communications Isidro E. Cacho, Jr. said that this event could also cause coal prices to rise as Europe restarts shuttered coal-fired plants to reduce its dependence on Russian energy.

He also added that although prices of some fuels have softened, coal is still up about 200% on its pre-Ukraine war price.

In terms of volume, the high spot market price deterred purchases, leaving the share of spot energy in the power market at 9.1% in June. IEMOP reported that the volume of energy purchased on WESM in June was the lowest in the second quarter.

Mr. Co said that in early July IEMOP expects the secondary price cap to be triggered frequently as daily spot prices range from P7 to P9. — Justine Irish D. Tabile