Economic [price of power]

Wholesale Electricity Spot Market (WESM)

WESM was created following the restructuring of the energy sector under Electric Power Industry
Reform Act (EPIRA) of 2001. WESM is where power suppliers disclose energy outputs and agree on
energy prices. The Philippine Electricity Market Corporation (PEMC) facilitates the trading at WESM.

Currently, the trading process at WESM works like this:

1. Stakeholders determine the total demand for electricity for a certain hour.
2. “Trading” happens. Seeing the demand, the suppliers submit bids, essentially telling PEMC they
are willing to supply, for example, 100 megawatts at P10 per megawatt.
3. PEMC ranks the bids from the lowest to the most expensive, until it has enough supply bids to
meet the total demand for power.
4. The highest priced offer that is accepted becomes the spot market’s price for the hour.
5. Electricity is thrown to the grid and facilitated by the National Grid Corporation of the
Philippines (NGCP).
6. Then it is distributed to households and businesses through distribution companies like Meralco.

Trading goes on an hourly basis, depending on demands from households, manufacturers, office
buildings, and other consumers. The numbers vary, change, increase or decrease.

Global [technical standards]

The goal of becoming one of the best power utilities in Southeast Asia is within reach for the country’s
sole power grid operator, NGCP, as it institutionalized the technical standardization system for the core
functions of the company.

Through technical standardization, NGCP is able to better develop and implement a system to improve
the quality of its services and operational efficiency, and more efficiently align its internal processes.
NGCP has set a total of 109 standards on equipment and material specifications, project and construction
management, planning and design, maintenance and testing, and operations, among others. These
standards are based on global standards and best practices of international power utilities.

“Setting these standards has made designing new projects and maintaining existing lines easier, but, at the
same time, more stringent. The standards serve as design references for new project requirements, hence,
consistent quality is ensured across our projects and maintenance activities,” said NGCP.

Legal [EPIRA (RA 9136)]

On June 8, 2001, President Gloria Macapagal-Arroyo signed into law Republic Act 9136, or the Electric
Power Industry Reform Act of 2001. The said enactment was the culmination of more than seven years of
public hearings and floor deliberations on various versions of the said measure in Congress. Among other
benefits, RA 9136 is designed to bring down electricity rates and to improve the delivery of power supply
to end-users by encouraging greater competition and efficiency in the electricity industry.
SAMPLE CONTENT

SEC. 6. Generation Sector. – Generation of electric power, a business affected with public interest, shall
be competitive and open.

Upon the effectivity of this Act, any new generation company shall, before it operates, secure from the
Energy Regulatory Commission (ERC) a certificate of compliance pursuant to the standards set forth in
this Act, as well as health, safety and environmental clearances from the appropriate government agencies
under existing laws.

Any law to the contrary notwithstanding, power generation shall not be considered a public utility
operation. For this purpose, any person or entity engaged or which shall engage in power generation and
supply of electricity shall not be required to secure a national franchise.

Upon implementation of retail competition and open access, the prices charged by a generation company
for the supply of electricity shall not be subject to regulation by the ERC except as otherwise provided in
this Act.

Pursuant to the objective of lowering electricity rates to end-users, sales of generated power by generation
companies shall be value added tax zero-rated.

The ERC shall, in determining the existence of market power abuse or anti-competitive behavior, require
from generation companies the submission of their financial statements.

SEC. 7 Transmission Sector.- The transmission of electric power shall be regulated common electricity
carries business, subject to the ratemaking powers of the ERC.

The ERC shall set the standards of the voltage transmission that shall distinguish the transmission from
the subtransmission assets. Pending the issuance of such new standards, the distinction between the
transmission and subtransmission assets shall be as follows: 230 kilovolts and above in the Luzon grid, 69
kilovolts and above in the Visayas and in the isolated distribution systems, and 138 kilovolts and above in
the Mindanao Grid: Provided, That for the Visayas and the isolated distribution system, should the 69
kilovolt line not form part of the main transmission grid and be directly connected to the substation of the
distribution utility, it shall form part of the subtransmission system.

Sociocultural [modernization]

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Technological
Supervisory control and data acquisition (SCADA) is an industrial control system which is used in many
modern industries like energy, manufacturing, power, water transportation, etc. SCADA systems organize
multiple technologies that allows to process, gather and monitor data at the same time to send instructions
to those points that transmit data. Most of the SCADA applications use human machine interface (HMI)
software that permits users to interact with machines to control the devices. HMI is connected to the
motors, valves and many more devices.

Some of the functions of SCADA in power distribution system are given below.

 Improving power system efficiency by maintaining an acceptable range of power factor

 Limiting peak power demand
  Continuous monitoring and controlling of various electrical parameters in both normal and
abnormal conditions
 Trending and alarming to enable operators by addressing the problem spot
 Historian data and viewing that from remote locations
 Quick response to customer service interruptions

Demographics [affects determining the size of a potential market]

Potential market is one of the considerations in building transmission towers especially in remote
or rural areas.

Public Pressure Groups

The aim of all pressure groups is to influence the people who actually have the power to make decisions.
Pressure groups do not look for the power of political office for themselves, but do seek to influence the
decisions made by those who do hold this political power.

Energy Industry Partners of NGCP:

 The Department of Energy

 Energy Regulatory Commission
 National Power Corporation
 Philippine National Oil Company
 Wholesale Electricity Spot Market
 National Transmission Corporation

Competitors
Technically, NGCP has no competitors since power transmission is a national monopoly.

Customers (Philippine residents)

Suppliers
Generation companies such as hydroelectric power plants, coal-fired power plants, etc. This can
affect NGCP through shutdown or sudden tripping of generating units. This can cause imbalance
in the frequency of the grid which is regulated by NGCP.
Power rate hike
The 30-day shutdown of the Malampaya natural gas facility is expected to jack up power rates by
at least P1 ($0.23) per kilowatt hour (kWh), the Philippine Independent Power Producers
Association, Incorporated (PIPPA) had said.
“I guarantee that there will be a spike because that happens whenever Malampaya shuts down,”
said PIPPA President Luis Miguel Aboitiz.
The power plants fueled by the Malampaya facility will have to shift to liquid fuel to keep them
running.
“Once the gas plans shift to liquid fuel, there’s around P1 ($0.23) per kWh automatic increase,”
said Aboitiz, referring to a spike in generation charge, the largest component of an electricity
bill.
Lawrence Fernandez, Meralco vice president and Head of Utility Economics, agreed that the rate
hike is estimated to reach at least P1 ($0.23) per kWh.
A Manila Electric Company (Meralco) bill is composed of the following charges: generation,
distribution, transmission, taxes, system loss, and lifeline subsidy.