8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
1/50
WESM Lecture Series Line Rental14 June 2013, Cebu City
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
2/50
Click to edit Master title style
Topic Outline
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
3/50
Click to edit Master title style
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
4/50
Click to edit Master title style
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
5/50
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
6/50
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
+
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
7/50
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
8/50
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
9/50
Click to edit Master title style
G1
Market Based Pricing
G2
PhP 3,000.00/MWh
100 MWDemand
System MarginalPrice
Determination of the Nodal Price
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
10/50
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
11/50
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?
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
12/50
Click to edit Master title style
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
13/50
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
14/50
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.
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
15/50
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.
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
16/50
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
17/50
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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
18/50
Click to edit Master title styleLRTA in the Settlement Amounts
Legal Basis WESM Rules (Settlement
Amounts for Trading Participants withBilateral Contracts)
WESM Rules Clause 3.13.17.2 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
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
19/50
Click to edit Master title styleLRTA in the Settlement Amounts
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?
Cli k t dit M t titl t l
LRTA i th S ttl t A t
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
20/50
Click to edit Master title styleLRTA in the Settlement Amounts
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
Cli k t dit M t titl t l
S ttl t ith Bil t l C t t
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
21/50
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
0 MWhLMP: P3,157.89/MWh LMP: P3,324.10/MWh
G2
TA: 3,000 (110.8 - 100)PhP 32,400
TA: 3324.10 (100 100)PhP 0.0
TAG TAL
Cli k t dit M t titl t l
Sample Calculation of Settlement Amounts
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
22/50
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
Click to edit Master title style
Sample Calculation of Settlement Amounts
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
23/50
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 3,324.00/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
Click to edit Master title style
Settlement with Bilateral Contracts
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
24/50
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
0 MWhLMP: P3,157.89/MWh LMP: P3,324.10/MWh
G2
TA: 3,000 (110.8 - 100)PhP 32,400
TA: PhP 0 TA: 3324.10 (100 100)+ LR
PhP 32,400TAG=TAL
Click to edit Master title style
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
25/50
Click to edit Master title style
Click to edit Master title style
Background
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
26/50
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
Click to edit Master title style
Background
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
27/50
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
Click to edit Master title style
Segregation of Line Rental Trading Amounts
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
28/50
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.
Click to edit Master title style
Approved Methodology
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
29/50
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
+
Click to edit Master title style
Market Price (LMP) Formula
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
30/50
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
Click to edit Master title style
Determination of Line Rental Trading
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
31/50
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
Click to edit Master title style
Segregation of Line Rental Trading Amounts
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
32/50
Click to edit Master title styleSegregation of Line Rental Trading Amounts
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
Click to edit Master title style
Segregation of Line Rental Trading Amounts
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
33/50
Click to edit Master title styleSegregation of Line Rental Trading Amounts
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
Click to edit Master title style
Segregation of Line Rental Trading Amounts
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
34/50
Click to edit Master title styleSegregation of Line Rental Trading Amounts
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
Click to edit Master title style
Sample Calculation of LRTA:Th B S
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
35/50
Click to edit Master title styleThree-Bus System
G1L1
Assumptions: Constant 5% Line LossWith congestion between G1 and G2
100 MWh100 MWh
PhP 2,800.00/MWh PhP 3,000.00/MWh PhP 3,127.95/MWh
G2
LF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096
SMP= LMP
10.8 MWh
Click to edit Master title style
Sample Calculation of LRTA:Th B S t
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
36/50
Click to edit Master title styleThree-Bus System
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
PhP 2,800.00/MWh PhP 3,000.00/MWh PhP 3,127.95/MWh
LF=1.003814; a=-188.6 TLF=1.0 TLF=0.95909610.8 MWh
Click to edit Master title style
Sample Calculation of LRTA:Th B S t
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
37/50
Click to edit Master title styleThree-Bus System
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
PhP 2,800.00/MWh PhP 3,000.00/MWh PhP 3,127.95/MWh
LF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096
10.8 MWh
Click to edit Master title style
Sample Settlement Calculation:Th B S t
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
38/50
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
Click to edit Master title style
Sample Calculation:Segregation of LRTA
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
39/50
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
Line Rental = BCQ ( )TLF TLF
Congestion G-L L GL G
Line Rental = BCQ [(LMP ) (LMP )]TLF TLF
Click to edit Master title style
Sample Calculation:Segregation of LRTA
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
40/50
Click to edit Master title styleSegregation of LRTA
Calculation of LRTA due to Losses
Losses G-L
L G
Line Rental = BCQ ( )TLF TLF
G1 L1100 MWh100 MWh
PhP 2,800.00/MWh PhP 3,000.00/MWh PhP 3,127.95/MWh
G2
TLF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096
10.8 MWh
Click to edit Master title style
Sample Calculation:Segregation of LRTA
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
41/50
ySegregation of LRTA
Calculation of LRTA due to Congestion
Congestion G-L L G
L G
Line Rental = BCQ [(LMP ) (LMP )]TLF TLF
G1 L1100 MWh110.8 MWh
PhP 2,800.00/MWh PhP 3,000.00/MWh PhP 3,127.95/MWh
G2
TLF=1.003814; a=-188.6 TLF=1.0 TLF=0.959096
10.8 MWh
Click to edit Master title style
Sample Calculation:Segregation of LRTA
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
42/50
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
Click to edit Master title style
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
43/50
y
Click to edit Master title style
Settlement Principles
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
44/50
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
Click to edit Master title style
Effect of the Segregation in WESMSettlement
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
45/50
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
Click to edit Master title style
Provision of LRTA Information
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
46/50
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.
Click to edit Master title style
Changes in the WESM Statement/Bill
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
47/50
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
Click to edit Master title style
Changes in the WESM Statement/Bill
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
48/50
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
Click to edit Master title style
Provision of LRTA Information
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
49/50
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.
8/21/2019 WESM Lecture Series_Line Rental (14 June 2013)
50/50
Thank Youwww.wesm.ph
http://www.wesm.ph/http://www.wesm.ph/