Updates on the Pricing and Cost Recovery
Mechanism (PCRM) for Reserves in the
Philippine Wholesale Electricity Spot Market
Market Operations Service
Energy Regulatory Commission
Application to Establish the Reserve Market in
the Wholesale Electricity Spot Market (WESM).
8 January 2007
Reserve Pricing and Cost
Recovery Mechanism (PCRM)
Ancillary Services Cost
Recovery Mechanism (AS-CRM)
Regulating, Contingency and
Dispatchable Reserves
Other ancillary services that are not traded in
the WESM as well as to reserve regions or
cost recovery zones where the WESM reserve
market is not yet in operation
Aims of the Reserve PCRM
Establishment of pricing of reserves traded
Reserve trading amounts of reserve providers
Allocation of reserve costs among the market participants
Administered prices and cost recovery charges during market
suspension and intervention.
Order directing PEMC to comply with at least ten (10)
major directives before the approval of the
implementation of the PCRM for Reserves in the WESM,
7 July 2008
• Implement Ex-ante Partial Effectiveness Factors to allow broader competition in Reserve Market Categories;
• Realign the Specification of Reserve Services to Create a Fast Contingency Service;
• Introduce New Lower Reserve Service;
• Introduce Interruptible Load Dropping (ILD) as a Fully Functioning Reserve Service;
• Implement an Interim Arrangement for ILD;
• Ensure that Appropriate Changes are introduced to the Grid Code;
• Document Procedures of the System Operator;
• Develop Measures to Mitigate Market Power;
• Plan for Future Enhancements; and
• Develop Interim Plans.
Motion for Approval of Phased–In
Implementation of WESM Pricing and Cost
Recovery Mechanism for Reserves
5 June 2009
1st
Phase – Initial Operations
of the Reserve Market; and
Initial implementation of the
reserve market pending the
development of further studies,
incorporation of the required
changes in the OATS Rules and the
ASPP, and introduction of
operational enhancements.
2nd Phase – Operational
Enhancements of the Reserve
Market.
Operational enhancements
in accordance with the
directives of the
Commission in its 7 July
2008 Order
Hearing on Issues. PEMC was directed to submit
proposed timeline for phased-in approach
1 March 2010
Order
15 November 2010
Inherent upon the SO to provide
adequate ancillary services
PEMC directed to comply
with July 7, 2008 Order,
Market Operator (MO) has the authority to (1) administer the
hearing on with
issues a consideration of the
Commission
competitive
tendering process1for
Ancillary
Services Providers,
March
2010
and/or (2) establish and administer the spot market and trading for
integration
of for
the
directed to planned
submit its proposed
timeline
the purchase of certain reserve categories,
the phased-in
approach
Visayas
and Luzon Grid
Deferment of phased-in implementation
Omnibus Motion for Partial Reconsideration
and to Issue an Order Impleading the System
Operator
18 March 2011
Approval of the phased-in
implementation of the
WESM Pricing and Cost
Recovery Mechanism
(PCRM) for Reserves;
Holding in abeyance the
filing for approval of the
reserve market in the
Visayas pending resolution
of the Luzon reserve
market; and
Impleading the System
Operator in the case.
Filed “Compliance” -- Update on its compliance
to the directed operational enhancements
April 20, 2010
ERC Directives/Tasks
1 Zonal Reserve Pricing in the Visayas
Submit Measures to Mitigate Market Power within 3
2
months
3 Implement an Ex-ante Partial Effectiveness Factor
4
Realign the Specification of Reserve Services to
Create a Fast Contingency Service
5 Introduce New Lower Reserve Service
6 Introduce ILD as a Fully Functioning Reserve Service
7 Implement an Interim Arrangement for ILD
PEMC Updates/Remarks as of March 2011


Initial study completed
On-going finalization/review by MO and SO

Creation of a technical working group for the purpose of formulating
policy and regulartory proposals which include study of mitigating
measure for energy and reserves.

Target completion of plan and study by end of 2Q 2011

Target completion of plan and study by end of 2Q 2011

Target completion of impact assessment by end of 2Q 2011

Preliminary study is on-going. Needs further consultation with NGCPSO.
Preliminary study is on-going. Needs further consultation with NGCPSO.
Initial study identified the following as the main focus for apprising the
participants:
o Implementation of Merit Order Table
o Implementation of Real-time Must-run
o Implementation of Generator Security Limits
Target completion of SO procedures and impact assessment by end of
2Q 2011


Document Procedures of the SO to Apprise
8 Participants How its Practices Affect Operation and
Commercial Outcomes

Order
6 July 2011
Denied the following:
Approval of the phased-in implementation
of the WESM Pricing and Cost Recovery
Mechanism (PCRM) for Reserves; and
Granted:
Implead the System Operator
Holding in abeyance the filing for approval
of the reserve market in the Visayas pending
hearing on issues
Commission
1 March 2010
resolution of the Luzon reserve market
directed to submit its proposed timeline for
the phased-in approach
Order
6 July 2011
Reiterates directives
embodied in the November
15, 2011 Order with
modifications as follows:
Within six (6) months
• Implement an Ex-ante Partial Effectiveness Factors to allow
broader competition in Reserve Market Categories;
• Realign the Specification of Reserve Services to Create a Fast
Contingency Service;
Within three (3) months
• Submit measures to Mitigate
Commission
Market Power 1 March 2010
• Set up New Lower Reserve Service;
• Introduce ILD as a Fully Functioning Reserve Service;
hearing on issues
directed to submit its proposed timeline for
the phased-in approach
• Set up an Interim Arrangement for ILD;
• Set up Appropriate Changes in the PGC; and
• Submit Plans for Future Enhancements and Develop Interim
Plans.