WESM Lecture Series Line Rental

14 June 2013, Cebu City

Topic Outline
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Click to edit Master title style

Pricing of
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Energy
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before
Master
EPIRA
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Regulated
Generation Costs:
The Old Regime
5.54 MWh

5.26 MWh
Single Supplier (NPC)
Regulated Rates
Based on blended costs
Cost of Losses are
shouldered by the
customers
L1

G1

G2

60.8 MWh
Php 3,000/MWh

50 MWh
Php 4,000/MWh

100 MWh
Php 3,824/MWh

Pricing Click
of Energy
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During
Master
EPIRA
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Supply

Demand

Price

Market-Based Pricing:
The New Regime

Volume

Marginal Price

Sales
Price is determined by interaction of
supply & demand

Market Price
Click (LMP)
to editFormula
Master title style
LMP

Generation
Price
(SMP)

Cost of
Losses

1
LMPi = + (
1) +
TLFi
LMPi

TLFi
ij
aij
n

Transmission
Congestion
Cost

+
n

aij

ij

j=1

Locational Marginal Price at location "i"

The system marginal price based on marginal plant offer and
transmission loss factor of the marginal plant
Transmission Loss Factor at location "i".
Price corresponding to transmission constraint between ith
and jth node
Sensitivity factor relating the contribution of generation at
location "i" to the energy flow related to constraint
between ith and jth node
The number of constraints involved that affects the node i

Comparison
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Zambales
Market Trading Nodes
PhP 4,300.34

Metro Manila
Trading Nodes
PhP 4,645.67

Nueva Ecija
Market Trading Nodes
PhP 4,500.45

Laguna/Batangas
Market Trading Nodes
PhP 4,445.56

Market Based
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Assumptions:

Constant 5% Line Loss

G1

G2

150 MW

150 MW

OFFER:
PhP 3,000.00/MWh

OFFER:
PhP 4,000.00/MWh

L1
100 MW

Market Based
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Determination of the Nodal Price

PhP 3,000.00/MWh
System Marginal
Price

G1
100 MW

G2
Demand

Settlement
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Assumptions:

Constant 5% Line Loss

5.54 MWh

G1
110.8 MWh
LMP: P3,000.00/MWh
TAG : 3,000 * 110.8
PhP 332,400

5.26 MWh

G2

L1

0 MWh
100 MWh
LMP: P3,157.89/MWh LMP: P3,324.10/MWh
TAL: 100 * 3,324.10
TA: PhP 0.0
PhP 332,400

TAG =

TAL

Power Supply
Click toContracts
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The WESM allows generators and customers to enter into bilateral
contracts that is settled outside the market.
The WESM only requires the declaration of the Bilateral Contract
Quantities on an hourly basis

Power supply contracts are based on the point of delivery as

agreed by the seller (generator) and buyer (customer).
Depending on the basis for setting of the contract rates, power supply
contracts stipulate which party bears the cost of losses and
congestion.
Point of delivery may either be at the generator plant gate or at the
customers connection point.

The WESM is not privy to the Supply Contracts between

Generators and Customers
Line rental charges are collected to account for system loss and
congestion costs incurred for quantities supplied through power
supply contracts.

What is Line Rental?

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Formal Definition
The economic rental arising from the use of a
transmission line, calculated as the difference in value
between flows out of the receiving node of that line and
flows into the sending node 1
Sending
Node

Receiving
Node
BCQ

G1
LMPRECEIVING LMPSENDING

L1

WESM Rules; WESM Price Determination Methodology

What is Click
Line Rental?
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Sending
Node

G2

Receiving
Node
BCQ

G1
Loss = 5 MWh

100 MWh
+5 MWh

L1
100 MWh

How is Line Rental Different from the

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Transmission
Charge?

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Line rental is computed in the WESM to

account for generation costs attributable to
line losses and congestion in the transmission
system associated with the delivery of
contracted energy (bilateral contracts).
Transmission charges are collected by the
NGCP to recover costs in the establishment,
maintenance and operation of the
transmission system.

What is Line
Trading
Amount?
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Master
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Legal Basis WESM Rules Clause 3.13.12
The Market Operator shall calculate the line rental trading
amounts for each transmission line in the market network model
as:
a) The expected flow of energy out of the receiving node of the
market network line as determined by the market dispatch
optimization model multiplied by the ex-ante nodal energy
settlement price at that node; less
b) The expected flow of energy into the sending node multiplied
by the ex-ante nodal energy settlement price at that node of
the market network line as determined by the market
dispatch optimization model.

What is Line
Trading
Amount?
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Line Rental Trading Amount (LRTA) = difference
between the customer ex-ante nodal price and the
generator ex-ante nodal price multiplied by the
Bilateral Contract Quantity (BCQ)
Line Rental = BCQ x (LMPRECEIVING LMPSENDING)
Line Rental = BCQ x (EAPL EAPG)
Sending
Node

Receiving
Node
BCQ

G1

L1

LRTA inClick
the Settlement
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Amounts
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Legal Basis WESM Rules (Settlement
Amounts for Trading Participants with
Bilateral Contracts)
WESM Rules Clause 3.13.17.1
For each billing period, the Market Operator shall determine the
settlement amount for each trading participant with bilateral contract
as the sum of the aggregate trading amounts for the trading intervals
in that billing period, determined in accordance with clause 3.13.17.2

LRTA inClick
the Settlement
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Amounts
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Legal Basis WESM Rules (Settlement
Amounts for Trading Participants with
Bilateral Contracts)
WESM Rules Clause 3.13.17.2
The aggregate trading amount for a Trading Participant for a trading
interval equals the sum of:
a)
b)
c)
d)
e)
f)

Ex-ante Energy Trading Amount

Ex-post Energy Trading Amount
Line Rental Trading Amount*
Transmission Right Trading Amount
Reserve Cost Recovery Charge
Other ancillary cost recovery charges

TA =
Ex-ante Energy Trading Amount
(EAETA) + Ex-post Energy
Trading Amount (EPETA)
+ Line Rental Trading Amount
(LRTA)

*WESM Rules require the parties to identify the party responsible for the payment of line rental charges. If not
identified, the same is charged to the customer.

LRTA inClick
the Settlement
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Amounts
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How is Line Rental Trading Amount calculated?
Generator

Customer

TTAG = EAQG x EAPG

TTAL = EAQL x EAPL

TTAG = (EAQG x EAPG) (BCQ x EAPG) TTAL = (EAQL x EAPL) (BCQ x EAPG)
TTAL = (EAQL BCQ + BCQ) x EAPL (BCQ x EAPG)
TTAG = (EAQG BCQ) x EAPG
TTAL = (EAQL BCQ) x EAPL + BCQ x EAPL (BCQ x EAPG)
Spot Trading Amount

TTAL = (EAQL BCQ) x EAPL + BCQ x (EAPL EAPG)

Spot Trading Amount

Line Rental
Trading Amount

LRTA inClick
the Settlement
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Amounts
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Settlement Calculation
General Equation for Settlement Amounts:
TA (PhP) = EAETA + EPETA + LRTA
TA (PhP) = EAP x (EAQ BCQ) + EPP x (MQ
EAQ) + BCQ x (EAPL EAPG)

Ideally, the TA collected from loads is equal to the

TA paid to be paid to generators. That is,
TALOAD = TAGEN

Settlement
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with
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Bilateral
Master
Contracts
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100 MWh Bilateral Contract Between G1 and L1

5.54 MWh

G1

5.26 MWh

G2

L1

110.8 MWh
0 MWh
100 MWh
LMP: P3,000.00/MWh LMP: P3,157.89/MWh LMP: P3,324.10/MWh
TA: 3324.10 (100 100)
TA: 3,000 (110.8 - 100)
PhP 0.0
PhP 32,400

TAG

TAL

Sample Calculation of Settlement Amounts

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to
edit
Master
title
style
with LRTA
Bilateral Contract Quantity G1 & L1 = 100 MWh

LR1 = PhP
100 x15,789.00
(3,157.89 3,000.00)

G1
PhP 3,000.00/MWh

G2
PhP 3,157.89/MWh

L1
PhP 3,324.10/MWh

Sample Calculation of Settlement Amounts

Click
to
edit
Master
title
style
with LRTA
Bilateral Contract Quantity G1 & L1 = 100 MWh

LR1 = PhP 15,789.00

G1

LR2 = PhP
100 x16,611.00
(3,324 3,157.89)

G2

PhP 3,000.00/MWh

PhP 3,157.89/MWh

LR = PhP 32,400.00

L1
PhP 3,324.00/MWh

Settlement
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with
to edit
Bilateral
Master
Contracts
title style
100 MWh Bilateral Contract Between G1 and L1

5.54 MWh

G1

5.26 MWh

G2

L1

110.8 MWh
0 MWh
100 MWh
LMP: P3,000.00/MWh LMP: P3,157.89/MWh LMP: P3,324.10/MWh
TA: 3324.10 (100 100)
TA: PhP 0
TA: 3,000 (110.8 - 100)
+ LR
PhP 32,400
PhP 32,400
TAG = TAL

Click to edit Master title style

Background
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ERC Orders
The ERC issued its Decision on 10 March
2010, finding that there was double charging
of transmission line cost on MERALCO
MERALCO shoulders the Line Loss component in the LR
as billed by PEMC and pays the 2.98% system loss charge
embedded in the NPC-TOU rates by NPC.

ERC issued an Order on 07 March 2011, granting the

request of PEMC to submit an alternative
methodology for the segregation of line rental
amounts into congestions costs and line losses

Background
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ERC Orders
ERC issued an Order dated 04 March 2013,
granting PEMCs WESM Manual on the
Segregation of Line Rental Trading Amounts.
ERC directs PEMC to conduct information
dissemination pertaining to the manual to all
WESM registered participants, particularly the
Visayas participants

Segregation
of Line
Rental
Trading
Amounts
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to edit
Master
title
style
Purpose of the WESM Manual
Manner by which line rental trading amounts
are computed in the WESM;
Methodology for segregating line rental trading
amounts into those associated with the cost of
losses and of congestion; and
Procedure for providing participants with line
rental trading amount information, including
data on transmission loss cost and congestion
cost for validation.

Approved
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Methodology
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The line rental segregation shall be based on
the formula for determining Locational
Marginal Prices (LMP) under the Price
Determination Methodology (PDM)
LMP

Generation
Price
(SMP)

LMPi =

Cost of
Losses

TLF i

* +

Transmission
Congestion
Cost

S j aij

Market Price
Click (LMP)
to editFormula
Master title style
1
LMPi = + (
1) +
TLFi
LMPi

TLFi
ij

aij

aij

ij

j=1

Locational Marginal Price at location "i"

The system marginal price based on marginal plant offer and
transmission loss factor of the marginal plant
Transmission Loss Factor at location "i".
Price corresponding to transmission constraint between ith
and jth node
Sensitivity factor relating the contribution of generation at
location "i" to the energy flow related to constraint
between ith and jth node
The number of constraints involved that affects the node i

Determination of Line Rental Trading

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to
edit
Master
title
Amount

style

BCQG-L (EAPL - EAPG)

Where:
BCQG-L - BCQ declared by generator G in favor of
customer L
EAPL or LMPL - Ex-Ante Nodal Price of customer L
EAPG or LMPG - Ex-Ante Nodal Price of generator G

Segregation
of Line
Rental
Trading
Amounts
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to edit
Master
title
style
LMPL =

LMPG =

TLFL

TLFG

ij-Laij-L
j=1

ij-Gaij-G
j=1

Line RentalLosses = BCQG-L

TLFL

TLFG

Line RentalCongestion = BCQG-L

ij-Laij-L
j=1

Line RentalCongestion = BCQG-L

LMPL

ij-Gaij-G
j=1

TLFL

LMPG

or

TLFG

Line RentalTotal = Line RentalLosses + Line RentalCongestion

Segregation
of Line
Rental
Trading
Amounts
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to edit
Master
title
style
Line Rental Due to Losses
Line RentalLosses = BCQ G-L (

TLFL

TLFG

Where:
BCQ G-L - BCQ between generator G and customer L

- System Marginal Price

TLFL - Transmission Loss Factor of customer L
TLFG - Transmission Loss Factor of generator G

Segregation
of Line
Rental
Trading
Amounts
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to edit
Master
title
style
Line Rental Due to Congestion
Line RentalCongestion = BCQ G-L [(LMPL

TLFL

) (LMPG

Where:
LMPL - Locational Marginal Price of customer L
LMPG - Locational Marginal Price of generator G

TLFG

)]

Sample Calculation of LRTA:

Three-BusClick
Systemto edit Master
Assumptions:

title style

Constant 5% Line Loss

With congestion between G1 and G2

G1

G2

100 MWh
TLF=1.003814; a=-188.6

10.8 MWh
TLF=1.0
PhP 3,000.00/MWh
SMP = LMP

PhP 2,800.00/MWh

L1
100 MWh
TLF=0.959096
PhP 3,127.95/MWh

Sample Calculation of LRTA:

Three-BusClick
Systemto edit Master

title style

Bilateral Contract Quantity between G1 & L1= 100 MWh

LR1 = PhP 20,000.00

LR1 = 100 x (3,000 2,800)

G1

G2

100 MWh
TLF=1.003814; a=-188.6

10.8 MWh
TLF=1.0
PhP 3,000.00/MWh

PhP 2,800.00/MWh

L1
100 MWh
TLF=0.959096
PhP 3,127.95/MWh

Sample Calculation of LRTA:

Three-BusClick
Systemto edit Master

title style

Bilateral Contract Quantity = 100 MWh

LR2 = PhP 12,795.00

LR1 = PhP 20,000.00

G1

LR2 = 100 x (3,127.95 3,000)

G2

100 MWh
10.8 MWh
PhP 2,800.00/MWh
PhP 3,000.00/MWh
TLF=1.003814; a=-188.6
TLF=1.0

LR = PhP 32,795.00

L1
100 MWh
PhP 3,127.95/MWh
TLF=0.959096

Sample Settlement Calculation:

Three-BusClick
Systemto edit Master

title style

100 MWh BCQ with line loss and congestion

between G1 and G2
Assuming MQ = EAQ
Load TA = EAP x (EAQ BCQ) + Line Rental
Trading Amount

For L1:
TAL1 = 3,127.95 x (100 100) + 32,795.00
= PhP 32,795.00

Sample Calculation:
Click
to
Segregation
of LRTA

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100 MWh BCQ with line loss and congestion

between G1 and G2
LRTA = PhP 32,795.00
Line RentalLosses = BCQ G-L (
Line RentalCongestion = BCQ G-L [(LMPL

TLFL

TLFL

TLFG

) (LMPG

TLFG

)]

Sample Calculation:
Click
to
Segregation
of LRTA

edit Master title style

Calculation of LRTA due to Losses

Line RentalLosses = BCQ G-L (

G1
100 MWh
PhP 2,800.00/MWh
TLF=1.003814; a=-188.6

G2
10.8 MWh
PhP 3,000.00/MWh
TLF=1.0

TLFL

TLFG

L1
100 MWh
PhP 3,127.95/MWh
TLF=0.959096

Sample Calculation:
Click
to
Segregation
of LRTA

edit Master title style

Calculation of LRTA due to Congestion

Line RentalCongestion = BCQ G-L [(LMPL

G1
110.8 MWh
PhP 2,800.00/MWh
TLF=1.003814; a=-188.6

G2
10.8 MWh
PhP 3,000.00/MWh
TLF=1.0

TLFL

) (LMPG

TLFG

L1
100 MWh
PhP 3,127.95/MWh
TLF=0.959096

)]

Sample Calculation:
Click
to
Segregation
of LRTA

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LRTA due to Losses = PhP 13,934.40

LRTA due to Congestion = PhP 18,860.60
Total LRTA = LRTA due to Losses + LRTA due
to Congestion
Total LRTA = PhP 13,934.40 + PhP 18,860.60
= PhP 32,795.00

Click to edit Master title style

Settlement
Click
Principles
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Trading amount is calculated for each trading interval (i.e.,
one hour). Monthly settlement amount is aggregate of hourly
trading amounts.
Two-settlement system applies so that the hourly trading
amount is the total of the ex-ante and ex-post trading
amounts for each trading interval.
Line Rental Trading Amounts are calculated based on the
formula as provided in the WESM Rules
Line Rental Trading Amounts will be segregated using the
methodology as provided in the WESM Manual on
Segregation of Line Rental Trading Amounts duly approved
by the ERC

Effect of the Segregation in WESM

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to
edit
Master
title
Settlement

style

Hourly LRTA being calculated for settlement

will be segregated
Separate line items in the WESM
statement/bill for the LRTA due to line losses
and LRTA due to congestion
No changes in the calculation of the LRTA

Provision
of LRTA
Information
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to edit
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Line rental trading amounts segregated into
the amounts attributable to the cost of losses
and of congestion shall be calculated by the
Market Operator and included in the billing
statements of trading participants following
the WESM billing and settlements timetable.

ChangesClick
in theto
WESM
Statement/Bill
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title style
Before: aggregated
LRTA

Billed to Suppliers Corporation

Description

Quantity

Amount

Ex-Ante Energy Trading Amount

1000 MWh

2,000,000.00

Ex-Post Energy Trading Amount

25 MWh

52,500.00

Line Rental Energy Trading Amount

100 MWh

32,795.00

Must Run Unit Adjustment

Net Settlement Surplus

Price Substitution Adjustment

VAT on Energy

Net Settlement Amount

2,085,295.00

ChangesClick
in theto
WESM
Statement/Bill
edit Master
title style
Now: Segregated
LRTA due to line
losses and LRTA
due to
congestion

Billed to Suppliers Corporation

Description

Quantity

Amount

Ex-Ante Energy Trading Amount

1000 MWh

2,000,000.00

Ex-Post Energy Trading Amount

25 MWh

52,500.00

Line Rental Energy Trading Amount

100 MWh

32,795.00

Line Rental Energy Trading Amount-Line Loss

100 MWh

13,934.40

Line Rental Energy Trading Amount-Congestion

100 MWh

18,860.60

Must Run Unit Adjustment

Net Settlement Surplus

Price Substitution Adjustment

VAT on Energy

Net Settlement Amount

2,085,295.00

Provision of
LRTAto
Information
Click
edit Master

title style

Additional information to validate segregated

line rental trading amounts may be provided
by the Market Operator subject to the
pertinent provisions of the WESM Rules and
the WESM Information Disclosure and
Confidentiality Manual.

Thank You
www.wesm.ph