WESM Lecture Series_Line Rental (14 June 2013)

8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)

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WESM Lecture Series Line Rental14 June 2013, Cebu City


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Click to edit Master title style

Topic Outline


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5.26 MWh

Pricing of Energy before EPIRA

G1L1

Php 3,000/MWh

G2

Php 4,000/MWh Php 3,824/MWh

RegulatedGeneration Costs:The Old Regime

Single Supplier (NPC) Regulated Rates

Based on blended costs

Cost of Losses are

shouldered by the

customers100 MWh60.8 MWh 50 MWh

5.54 MWh


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Click to edit Master title stylePricing of Energy During EPIRA

Market-Based Pricing:

The New Regime

Sales

Price

Marginal Price

Volume

Price is determined by interaction of

supply & demand

Demand

Su

pply


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Click to edit Master title styleMarket Price (LMP) Formula

n

i ij

j=1i

1LMP= + ( 1) +

TLF ija

LMPi - Locational Marginal Price at location "i" - The system marginal price based on marginal plant offer and

transmission loss factor of the marginal plantTLFi - Transmission Loss Factor at location "i".ij - Price corresponding to transmission constraint between i

th

andjthnode

aij - Sensitivity factor relating the contribution of generation atlocation "i" to the energy flow related to constraintbetween ithandjthnode

n - The number of constraints involved that affects the node i

LMPGeneration

Price

(SMP)=

Cost of

Losses+

Transmission

Congestion

Cost

+


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Click to edit Master title styleComparison of Pricing

Metro ManilaTrading Nodes

PhP 4,645.67 Laguna/Batangas

Market Trading Nodes

PhP 4,445.56

Zambales

Market Trading Nodes

PhP 4,300.34

Nueva EcijaMarket Trading Nodes

PhP 4,500.45


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Click to edit Master title styleMarket Based Pricing

G1L1

G2

OFFER:PhP 3,000.00/MWh

OFFER:PhP 4,000.00/MWh

150 MW 150 MW 100 MW

Assumptions: Constant 5% Line Loss


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G1

Market Based Pricing

G2

PhP 3,000.00/MWh

100 MWDemand

System MarginalPrice

Determination of the Nodal Price


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Click to edit Master title styleSettlement

G1L1

Assumptions: Constant 5% Line Loss

100 MWh110.8 MWh

5.54 MWh 5.26 MWh

LMP: P3,000.00/MWh

0 MWhLMP: P3,157.89/MWh LMP: P3,324.10/MWh

G2

TAG : 3,000 * 110.8PhP 332,400

TA: PhP 0.0 TAL: 100 * 3,324.10PhP 332,400

TAG = TAL


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Click to edit Master title stylePower Supply Contracts

TheWESM allows generators and customers to enter into bilateralcontracts 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 asagreed 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 betweenGenerators and Customers

Line rental charges are collected to account for system loss and

congestion costs incurred for quantities supplied through powersupply contracts.

What is Line Rental?


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1WESM Rules; WESM Price Determination Methodology

What is Line Rental?Formal Definition

The economic rental arising from the use of a

transmission line, calculated as the difference in valuebetween flows out of the receiving node of that line and

flows into the sending node1

G1 L1

SendingNode

BCQ

ReceivingNode

LMPRECEIVINGLMPSENDING


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Click to edit Master title styleWhat is Line Rental?

G1 L1

SendingNode

BCQ

ReceivingNode

100 MWh 100 MWh

Loss = 5 MWh

G2

+5 MWh

How is Line Rental Different from the


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Click to edit Master title styleHow is Line Rental Different from theTransmission Charge?

Line rental is computed in the WESM to

account for generation costs attributable toline losses and congestion in the transmissionsystem 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 thetransmission system.


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Click to edit Master title styleWhat is Line Rental Trading Amount?

Legal Basis WESM Rules Clause 3.13.12

The Market Operator shall calculate the line rental tradingamounts for each transmission line in the market network modelas:

a) The expected flow of energy out of the receiving node of themarket network line as determined by the market dispatchoptimization model multiplied by the ex-ante nodal energysettlement price at that node; less

b) The expected flow of energy into the sending node multipliedby the ex-ante nodal energy settlement price at that node of

the market network line as determined by the marketdispatch optimization model.


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Click to edit Master title styleWhat is Line Rental Trading Amount?

Line Rental Trading Amount (LRTA) = differencebetween the customer ex-ante nodal price and the

generator ex-ante nodal price multiplied by theBilateral Contract Quantity (BCQ)

G1 L1

SendingNode

BCQ

ReceivingNode

Line Rental = BCQ x (EAPLEAPG)

Line Rental = BCQ x (LMPRECEIVINGLMPSENDING)

Cli k di M i l l

LRTA i h S l A


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Click to edit Master title styleLRTA in the Settlement Amounts

Legal Basis WESM Rules (Settlement

Amounts for Trading Participants withBilateral 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 contractas the sum of the aggregate trading amounts for the trading intervalsin that billing period, determined in accordance with clause 3.13.17.2

Cli k di M i l l

LRTA i h S l A


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Legal Basis WESM Rules (Settlement

Amounts for Trading Participants withBilateral 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) Ex-ante Energy Trading Amount

b) Ex-post Energy Trading Amount

c) Line Rental Trading Amount*

d) Transmission Right Trading Amount

e) Reserve Cost Recovery Chargef) Other ancillary cost recovery charges

TA =Ex-ante Energy Trading Amount(EAETA) + Ex-post EnergyTrading 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 notidentified, the same is charged to the customer.

Cli k t dit M t titl t l

LRTA i th S ttl t A t


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Generator

TTAG= EAQGx EAPG

TTAG= (EAQGx EAPG) (BCQ x EAPG)

TTAG= (EAQGBCQ) x EAPG

Customer

TTAL= EAQLx EAPL

TTAL= (EAQLx EAPL) (BCQ x EAPG)

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

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

TTAL= (EAQLBCQ) x EAPL+ BCQ x(EAPL EAPG)Spot Trading Amount

Spot Trading Amount Line RentalTrading Amount

How is Line Rental Trading Amount calculated?


LRTA i th S ttl t A t


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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 (EAPLEAPG)

Ideally, the TA collected from loads is equal to the

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


S ttl t ith Bil t l C t t


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Click to edit Master title styleSettlement with Bilateral Contracts

G1 L1

100 MWh Bilateral Contract Between G1 and L1

100 MWh110.8 MWh

5.54 MWh 5.26 MWh

LMP: P3,000.00/MWh


G2

TA: 3,000 (110.8 - 100)PhP 32,400

TA: 3324.10 (100 100)PhP 0.0

TAG TAL


Sample Calculation of Settlement Amounts


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Click to edit Master title styleSample Calculation of Settlement Amountswith LRTA

G1L1

Bilateral Contract Quantity G1 & L1 = 100 MWh

PhP 3,000.00/MWh PhP 3,157.89/MWh PhP 3,324.10/MWh

LR1= 100 x (3,157.89 3,000.00)LR1= PhP 15,789.00

G2


Sample Calculation of Settlement Amounts


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Click to edit Master title styleSample Calculation of Settlement Amountswith LRTA

G1L1

Bilateral Contract Quantity G1 & L1 = 100 MWh


LR2= 100 x (3,324 3,157.89)LR1= PhP 15,789.00 LR2= PhP 16,611.00

G2

LR = PhP 32,400.00


Settlement with Bilateral Contracts


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Click to edit Master title styleSettlement with Bilateral Contracts

G1 L1

100 MWh Bilateral Contract Between G1 and L1

100 MWh110.8 MWh

5.54 MWh 5.26 MWh

LMP: P3,000.00/MWh


G2

TA: 3,000 (110.8 - 100)PhP 32,400

TA: PhP 0 TA: 3324.10 (100 100)+ LR

PhP 32,400TAG=TAL



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Background


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Click to edit Master title styleBackground

ERC Orders

The ERC issued its Decision on 10 March2010, finding that therewas double chargingof 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 chargeembedded 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 rentalamounts into congestions costs and line losses


Background


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Click to edit Master title styleBackground

ERC Orders

ERC issued an Order dated 04 March 2013,granting PEMCs WESM Manual on theSegregation of Line Rental Trading Amounts.

ERC directs PEMC to conduct informationdissemination pertaining to the manual to allWESM registered participants, particularly the

Visayas participants


Segregation of Line Rental Trading Amounts


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Click to edit Master title styleSegregation of Line Rental Trading Amounts

Purpose of the WESM Manual

Manner by which line rental trading amountsare computed in the WESM;

Methodology for segregating line rental tradingamounts into those associated with the cost of

losses and of congestion; and

Procedure for providing participants with linerental trading amount information, including

data on transmission loss cost and congestioncost for validation.


Approved Methodology


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Click to edit Master title styleApproved Methodology

The line rental segregation shall be based on

the formula for determining LocationalMarginal Prices (LMP) under the PriceDetermination Methodology (PDM)

LMPi = +

1

TLF i

1 * + j ai j

LMP

Generation

Price(SMP)

=Cost of

Losses+

Transmission

CongestionCost

+


Market Price (LMP) Formula


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Click to edit Master title styleMarket Price (LMP) Formula

n

i ij

j=1i

1LMP= + ( 1) +TLF

ija

LMPi - Locational Marginal Price at location "i" - The system marginal price based on marginal plant offer and

transmission loss factor of the marginal plantTLFi - Transmission Loss Factor at location "i".ij - Price corresponding to transmission constraint between i

th

andjthnodeaij - Sensitivity factor relating the contribution of generation at

location "i" to the energy flow related to constraintbetween ithandjthnoden - The number of constraints involved that affects the node i


Determination of Line Rental Trading


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Click to edit Master title stylegAmount

BCQG-L(EAPL- EAPG)

Where:

BCQG-L

- BCQ declared by generator G in favor ofcustomer L

EAPLor LMPL - Ex-Ante Nodal Price of customer L

EAPGor LMPG - Ex-Ante Nodal Price of generator G




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LMPL=

TLFL+ ij-Laij-L

n

j=1

LMPG=

TLFG+ ij-Gaij-Gn

j=1

Line RentalLosses=BCQG-L TLFL

TLFG

Line RentalCongestion=BCQG-L ij-Laij-L ij-Gaij-Gnj=1

n

j=1

Line RentalCongestion= BCQG-L LMPL TLFL

LMPG TLFG

Line RentalTotal= Line RentalLosses+ Line RentalCongestion

or




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Line Rental Due to Losses

Losses G-L

L G

Line Rental = BCQ ( )TLF TLF

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

- System Marginal PriceTLFL - Transmission Loss Factor of customer L

TLFG - Transmission Loss Factor of generator G




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Line Rental Due to Congestion

Congestion G-L L G

L G

Line Rental = BCQ [(LMP ) (LMP )]TLF TLF

Where:

LMPL - Locational Marginal Price of customer LLMPG - Locational Marginal Price of generator G


Sample Calculation of LRTA:Th B S


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Click to edit Master title styleThree-Bus System

G1L1

Assumptions: Constant 5% Line LossWith congestion between G1 and G2

100 MWh100 MWh


G2

LF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096

SMP= LMP

10.8 MWh


Sample Calculation of LRTA:Th B S t


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G1L1

Bilateral Contract Quantity between G1 & L1= 100 MWh

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

LR1= PhP 20,000.00

G2

100 MWh100 MWh


LF=1.003814; a=-188.6 TLF=1.0 TLF=0.95909610.8 MWh


Sample Calculation of LRTA:Th B S t


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G1L1

Bilateral Contract Quantity = 100 MWh

LR2= 100 x (3,127.95 3,000)LR2= PhP 12,795.00

G2

LR1= PhP 20,000.00

LR = PhP 32,795.00

100 MWh100 MWh


LF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096

10.8 MWh


Sample Settlement Calculation:Th B S t


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Click to edit Master title styleThree-Bus System100 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:Segregation of LRTA


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Click to edit Master title styleSegregation of LRTA

100 MWh BCQ with line loss and congestion

between G1 and G2

LRTA = PhP 32,795.00

Losses G-L

L G


Congestion G-L L GL G





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Click to edit Master title styleSegregation of LRTA

Calculation of LRTA due to Losses

Losses G-L

L G


G1 L1100 MWh100 MWh


G2

TLF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096

10.8 MWh




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ySegregation of LRTA

Calculation of LRTA due to Congestion

Congestion G-L L G

L G


G1 L1100 MWh110.8 MWh


G2

TLF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096

10.8 MWh




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ySegregation of LRTA

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



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y


Settlement Principles


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yp

Trading amount is calculated for each trading interval (i.e.,one hour). Monthly settlement amount is aggregate of hourlytrading amounts.

Two-settlement system applies so that the hourly tradingamount is the total of the ex-ante and ex-post tradingamounts for each trading interval.

Line Rental Trading Amounts are calculated based on theformula as provided in the WESM Rules

Line Rental Trading Amounts will be segregated using themethodology as provided in the WESM Manual on

Segregation of Line Rental Trading Amounts duly approvedby the ERC


Effect of the Segregation in WESMSettlement


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ySettlement

Hourly LRTA being calculated for settlementwill be segregated

Separate line items in the WESMstatement/bill for the LRTA due to line lossesand LRTA due to congestion

No changes in the calculation of the LRTA


Provision of LRTA Information


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y

Line rental trading amounts segregated intothe amounts attributable to the cost of lossesand of congestion shall be calculated by theMarket Operator and included in the billingstatements of trading participants followingthe WESM billing and settlements timetable.


Changes in the WESM Statement/Bill


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y

Before: aggregatedLRTA Billed to Suppliers CorporationDescription 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 0 -

Net Settlement Surplus 0 -

Price Substitution Adjustment 0 -

VAT on Energy 0 -

Net Settlement Amount 0 2,085,295.00


Changes in the WESM Statement/Bill


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Now: Segregated

LRTA due to linelosses and LRTAdue tocongestion

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 0 -

Net Settlement Surplus 0 -

Price Substitution Adjustment 0 -

VAT on Energy 0 -

Net Settlement Amount 2,085,295.00


Provision of LRTA Information


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Additional information to validate segregatedline rental trading amounts may be providedby the Market Operator subject to thepertinent provisions of the WESM Rules andthe WESM Information Disclosure andConfidentiality Manual.


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Thank Youwww.wesm.ph
http://www.wesm.ph/http://www.wesm.ph/

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WESM Lecture Series_Line Rental (14 June 2013)

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