WESM Lecture Series_Line Rental (14 June 2013)

WESM Lecture Series – Line Rental 14 June 2013, Cebu City

Topic Outline Click to edit Master title style

Click to edit Master title style

Pricing of Click Energy to edit before Master EPIRA title style 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 to edit During Master EPIRA title style Market-Based Pricing: The New Regime    e    c     i    r     P

    d    n    a    m    e     D

   y     l    p    p    u     S

Marginal Price    e    m    u     l    o     V

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 λ

TLFi  μij

aij  n

-

Transmission Congestion Cost

+ n

  ijaij 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 j th node Sensitivity factor relating the contribution of generation at location "i" to the energy flow related to constraint between ith and j th node The number of constraints involved that affects the node “i”

Comparison Click of to Pricing edit Master title style

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 Click toPricing edit Master title style 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 Click toPricing edit Master title style 

Determination of the Nodal Price

PhP 3,000.00/MWh System Marginal Price

G1 100 MW

G2 Demand

Settlement Click to edit Master title style Assumptions:

Constant 5% Line Loss

5.54 MWh

G1

5.26 MWh

G2

L1

110.8 MWh LMP: P3,000.00/MWh

0 MWh LMP: P3,157.89/MWh

TAG : 3,000 * 110.8 PhP 332,400

TA: PhP 0.0

TAG =

TAL

100 MWh LMP: P3,324.10/MWh TAL: 100 * 3,324.10 PhP 332,400

Power Supply Click toContracts edit Master title style 

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 customer’s 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?

Click to edit Master title style 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

1 WESM

L1

Rules; WESM Price Determination Methodology

What is Click Line Rental? to edit Master title style Sending Node

G2

Receiving Node BCQ

G1 Loss = 5 MWh

100 MWh +5 MWh  



L1 100 MWh

How is Line Rental Different from the Click to edit Master Transmission Charge? 



title style

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? ClickRental to edit Master title style 

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? ClickRental to edit Master title style 

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 (LMP RECEIVING – LMPSENDING) Line Rental = BCQ x (EAPL – EAPG) Sending Node

Receiving Node BCQ

G1

L1

LRTA inClick the Settlement to edit Master Amounts title style 

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 to edit Master Amounts title style 

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 to edit Master Amounts title style How is Line Rental Trading Amount calculated? Generator

Customer

TTAG = EAQG x EAPG

TTAL = EAQ L x EAPL

TTAG = (EAQ G x EAP G) – (BCQ x EAPG) TTAL = (EAQ L x EAPL) – (BCQ x EAPG) TTAG = (EAQ G – BCQ) x EAP G

TTAL = (EAQ L – BCQ + BCQ) x EAPL – (BCQ x EAP G) TTAL = (EAQ L – BCQ) x EAPL + BCQ x EAPL – (BCQ x EAP G)

Spot Trading Amount

TTAL = (EAQ L – BCQ) x EAP L + BCQ x (EAPL – EAPG)

Spot Trading Amount

Line Rental Trading Amount

LRTA inClick the Settlement to edit Master Amounts title style 

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 Click 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 LMP: P3,000.00/MWh

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

5.54 MWh

G1 110.8 MWh LMP: P3,000.00/MWh

5.26 MWh

G2

L1

0 MWh 100 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 Click to edit Master title style 

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 Click to edit Master title style 

ERC Orders • ERC issued an Order dated 04 March 2013, granting PEMC’s  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 Click 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 Click Methodology to edit Master title style 

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)

+

1

LMPi =

+

TLF

i

Cost of Losses

+

1

+

*

Transmission Congestion Cost

 j a  ij

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

TLFi

-

 μij

-

aij 

-

n

-

n

  ijaij 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 i th and j th node Sensitivity factor relating the contribution of generation at location "i" to the energy flow related to constraint between ith and j th node The number of constraints involved that affects the node “i”

Determination of Line Rental Trading Click 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 Click to edit Master title style n

 

LMPL =

LMPG =

TLFL



 +

ij-Laij-L

 j=1

 n

 

TLFG

 +

ij-Gaij-G

 j=1

Line RentalLosses

BCQG-L

 =

 

TLF − L



 

n

Line RentalCongestion = BCQG-L

 =

BCQG-L

− n

ij-Laij-L

 j=1

Line RentalCongestion



TLFG

 j=1

LMP − L



ij-Gaij-G

or

 

 − LMP − TLF G

L

 



TLFG

Line RentalTotal = Line RentalLosses + Line Rental Congestion

Segregation of Line Rental Trading Amounts Click 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 λ TLFL - Transmission Loss Factor of customer L TLFG - Transmission Loss Factor of generator G

Segregation of Line Rental Trading Amounts Click 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

10.8 MWh TLF=1.0

LF=1.003814; µa=-188.6 PhP 2,800.00/MWh

PhP 3,000.00/MWh SMP = LMP

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

10.8 MWh TLF=1.0

TLF=0.959096

PhP 3,000.00/MWh

PhP 3,127.95/MWh

LF=1.003814; µa=-188.6 PhP 2,800.00/MWh

L1 100 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 PhP 2,800.00/MWh

10.8 MWh PhP 3,000.00/MWh

LF=1.003814; µa=-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

edit Master title style

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; µa=-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; µa=-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    

edit Master title style

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 to edit Master title style 



 

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 Click 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 Click to edit Master title style 

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 thetoWESM Statement/Bill edit Master 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

0

-

Net Settlement Surplus

0

-

Price Substitution Adjustment

0

-

VAT on Energy

0

-

Net Settlement Amount

0

2,085,295.00

ChangesClick in thetoWESM 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

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

-

Line Rental Energy Trading Amount

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.