Insight into Philippines electricity market

THE EDITOR, Madam:

I’ll try to explain the Filipino electricity retail market, to which my friend Phillip Paulwell referred to in his article in The Sunday Gleaner ‘Tackling electricity theft: A call for action on JPS’.

Even though electricity is delivered via a common grid (shared wires), consumer ‘CONalpha’ can ensure they are buying from a specific retail provider, say, ‘7Prov’, through a well-regulated process under a retail competition and open access (RCOA) framework. Here’s how this works from a technical and market perspective:

1. Separation of electricity flows from commercial transactions: Physically, all electricity is delivered through a single transmission and distribution system (the common wires). However, the electricity trading and billing process are separated from the actual flow of electrons. 7Prov (the electricity retailer) buys power from generators or the wholesale market and enters into a commercial contract with CONalpha. The agreement specifies the terms, price, and, potentially, the source of the electricity (e.g., renewable).

2. Smart metering and data tracking: CONalpha will have a smart meter installed, which measures their exact electricity usage in real-time or at intervals. This data is used for billing purposes and is recorded separately for each consumer.

The smart meter does not differentiate the physical electricity source, but it records how much energy CONalpha uses, which is attributed to 7Prov in the retail market.

3. Energy accounting and settlement: 7Prov is financially responsible for supplying the electricity consumed by CONalpha. Even though the electricity is mixed in the grid, the retail supplier’s obligation is to meet CONalpha’s demand through purchasing enough energy from generators or the wholesale market.

The independent market operator and the grid operator handle the overall grid balancing, making sure that all providers, including 7Prov, inject the correct amount of power into the grid to meet the total demand.

4. RCOA framework: Under the RCOA, CONalpha chooses 7Prov as their retail provider based on price, service level, or other factors like renewable energy options. This agreement doesn’t affect how electricity is delivered physically but ensures that CONalpha is financially connected to 7Prov.

The grid operator delivers electricity to CONalpha, but the contract and payments are made with 7Prov.

5. Billing and reconciliation: At the end of each billing cycle, 7Prov bills CONalpha based on their usage data (captured by the smart meter). The bill reflects CONalpha’s electricity consumption and the agreed-upon rates in the contract with 7Prov.

The market operator ensures that each retail provider like 7Prov matches the electricity it purchases with the consumption of its customers. This settlement process makes sure that CONalpha’s consumption is accounted for as coming from 7Prov’s energy pool, even though all energy flows through the same grid.

6. Grid neutrality: The transmission and distribution operators are legally required to remain neutral. They do not influence or interfere with who sells electricity; their role is to ensure stable and reliable electricity delivery, regardless of the commercial provider chosen by the consumer.

The physical flow of electricity is shared, but the commercial transactions are tracked and settled through metering, contracts, and the market structure.

DENNIS MINOTT