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While the basic features of the electrical power system have remained
practically unchanged in the past century, there are some significant milestones
in the evolution of electrical power systems:
The transmission network consists of an extra high voltage (220 kV and above)
lines interconnecting large generators to major load centers. These lines are capable of
transmitting large amounts of power over large distances. For example, several 400 kV
lines may be required to transmit, say, 2000 MW from a large thermal power plant to a
distant load center. It is to be considered that high voltage dc lines are suitable if
distances are very large. Generators, typically having terminal voltages of around 15 kV
and are connected to these EHV lines through transformers. Interconnecting
transformers connect EHV lines at different voltage.
The Electric Power Industry Reform Act (EPIRA) is one of the landmark
pro-market reforms implemented to achieve reliable and competitively priced
electricity in the Philippines. Due to its perceived ineffectiveness, however, the
law has been subjected to a number of criticisms with some calling for its review,
if not an outright repeal. This Policy Note revisits the achievements and concerns
regarding the implementation of EPIRA in the country. In particular, it
enumerates the success and progress of the law, while drawing critical
reflections that can be useful in drawing policy implications.
From a two-sector industry, EPIRA divided the electric power industry into
four, namely, generation, transmission, distribution, and supply. Generation
became competitive and open. The transmission and distribution of electric
power remained regulated, subject to the rate making powers of the Energy
Regulatory Commission (ERC). Meanwhile, supply of electricity to the
contestable market was deemed not a public utility operation and suppliers were
not required to secure national franchise. Prices charged by the suppliers were
subjected to ERC regulation.
EPIRA seeks to separate prices for retail power supplies and associated
customer services that will be supplied competitively from the regulated delivery
charges. The target was to have all the distribution utilities (DUs) apply for tariffs
unbundling by December 2002. However, it was only in December 2008 that
almost all of the unbundling applications of 120 electric cooperatives, 20 private
utilities, and the NPC3 were decided by ERC.
Elimination of cross-subsidies
In 2002 and 2005, the intergrid (between Luzon and Visayas) and intragrid
(within Luzon) subsidies were removed, respectively. Meanwhile, the interclass
subsidies (between industrial and residential) were removed in 2005. This was
done primarily to reflect the true cost of service delivery in the power sector.
Such removal of interclass subsidies was done in two phases to allow for smooth
adjustment, where 40 percent of the subsidies was removed in 2004 and 60
percent was taken out in 2005.
While the power sector has progressed under EPIRA, this is not to say
that everything worked perfectly. For instance, Joskow (2005) warned of the
potential risk that may emerge when the energy sector reform is done
incompletely or incorrectly. In the case of the implementation of EPIRA, this
includes the incomplete elimination of the cross-subsidization.
Consequently, the associated costs of this policy are currently being
shouldered by the ratepayers in the form of universal charges. As such, it
would be very useful to determine how this policy is being valued at the
locality to assess whether the current efforts to boost electrification increase
or reduce social welfare
EPIRA also missed some of its major targets. This includes the
delayed creation of a competitive retail sector under RCOA. At present, the
mandatory migration of large electric consumers to RCOA is halted by a
temporary restraining order issued by the Supreme Court. This signals
uncertainties and the lack of commitment on the part of the government to
implement its agenda of having a competitive power sector. This can have far
reaching implications particularly on the pursuit to secure adequate private
sector-led investments in the energy sector.
The Philippine power sector can also push for stronger political
commitment to the reform. Any increase in competition is anchored on how
effective a sector can attract additional players. This will ensure that no huge
markups of the incumbent can be maintained in the long run. However, the
long-run tendency of the market to have more competition in the market is
hampered by the uncertainties brought about by sudden interventions of the
government. A case in point is when ERC imposed a cap of PHP 62/kWh in
2013 as a result of a price spike in the WESM. Felder warned that such
immediate response to reduce prices through sudden regulatory mandates
can undercut price signals, which later on can get worse and result in a
vicious cycle of regulatory uncertainty, unfriendly investment climate, and
counterproductive.
C. Major Components of Deregulated Power Systems
Unbundling of traditionally vertically integrated utility.
One of the principal characteristics of a competitive structure is the
identification and separation of the various tasks which are normally
carried out within the traditional organization so that these tasks can be
open to competition whenever practical and profitable. This process is
called unbundling. An unbundled structure contrasts with the so-called
vertically integrated utility of today where all tasks are coordinated jointly
under one umbrella with one common goal, that is, to minimize the total
costs of operating the utility. One of the first steps in the restructuring
process of the power industry has been the separation of the transmission
activities from the electricity generation activities. The subsequent step
was to introduce competition in generation activities, either through the
creation of power pools, provision for direct bilateral transactions or
bidding in the spot markets.
On the other hand, the transmission system has significant
economics of scale. Consequently it was suited to be a natural monopoly
and a separate entity. It was felt necessary to introduce regulation in
transmission so as to prevent it from overcharging for its services. The
transmission system thus became a neutral, natural monopoly subject to
regulation by public authorities. And to overcome the monopolistic
characteristic, the trend has been to establish new legal and regulatory
frameworks offering third parties "open access" to the transmission
network subject to technical constraints.
An important point to note is that the restructuring process was
however not uniform in all countries. While in many instances, it started
with the breaking up of a large vertically integrated utility, in certain other
instances restructuring was characterized by the opening up of small
municipal monopolies to competition.
In brief, Electric utilities are expected to split apart into unbundled
companies, with each utility re-aligning itself into several other companies
that respectively focus on each part of the new industry. This is known as
Disaggregation. Under deregulation, the vertically integrated utility, one
giant company that generates, transmits, distributes and sells electricity in
coordinated manner will become thing of the past. To function in an open
access system, such utilities will have to rearrange their operational
organization to match the unbundled functions they must perform. Each
part of the company will need to work in its new form. Generation will have
to compete in the competitive power generation market place.
Generally, the governments advocating deregulation want
competition in energy production, and they want to see significant levels of
customer choice in the retail market for electricity. At the same time, it
recognizes that it is best to have only one transmission and one
distribution system in any one area.
Therefore, the purpose of deregulation is to restructure the electric
industry so that power production and retail sales are competitive, while
delivery is still a regulated, monopoly franchise business.
The opening of the power system markets gives rise to issues
never seen before by this industry. One of the most important is the
control of information. Information that used to be common knowledge is
now kept private by the new agents of the system. Data such as the
generator cost functions are now known only by the owning companies,
defining a new system consisting of a group of independent firms seeking
the maximization of their own profit. There have been many proposals to
organize the new market in an economically efficient manner.
Nevertheless, the uniqueness of the electric power system has prevented
the development of such a market.
In the deregulation process, some new entities are expected to
appear and hold major rules in power industry. The structural components
representing various segments of the electricity market are:
• Generation Companies (GenCos.)
• Transmission Companies (TransCos.)
Distribution Companies (DisCos.)
Independent Power producer (IPP)
Independent System Operator (ISO)
Power Exchange (PX)
Retail Energy Service Companies (RESCos.)
The GENCOs compete in a free market to sell the electricity they produce. The
retail customer buys the electricity from the DISCOs and the responsibility for the
transfer of the power from the GENCOs to the DISCOs is that of the TRANSCO.
Although only one TRANSCO has been shown in the Fig, in reality there may be more
than one TRANSCO and these TRANSCOs will continue to be interconnected. Thus a
bilateral transaction of power between a GENCO and a DISCO may flow through more
than one TRANSCO.
• Generation Subsystem
• Distribution Subsystem
• Utilization Subsystem
Generation Subsystem
Steam turbines operate at relatively high speeds of 3600 or 1800 rpm. The
generators to which they are coupled are cylindrical rotor, two-pole for 3600 rpm, or four-
pole for 1800 rpm operation. Hydraulic turbines, particularly those operating with a low
pressure, operate at low speed. Their generators are usually a salient type rotor with
many poles. In a power station, several generators are operated in parallel in the power
grid to provide the total power needed. They are connected at a common point called a
bus. With concerns for the environment and conservation of fossil fuels, many alternate
sources are considered for employing the untapped energy sources of the sun and the
earth for generation of power. Some alternate sources used are solar power, geothermal
power, wind power, tidal power, and biomass. The motivation for bulk generation of
power in the future is the nuclear fusion. If nuclear fusion is harnessed economically, it
would provide clean energy from an abundant source of fuel, namely water.
The transformer transfers power with very high efficiency from one level of voltage
to another level. The power transferred to the secondary is almost the same as the
primary, except for losses in the transformer.
Insulation requirements and other practical design problems limit the generated
voltage to low values, usually 30 kV. Thus, step-up transformers are used for transmission
of power. At the receiving end of the transmission lines step-down transformers are used
to reduce the voltage to suitable values for distribution or utilization. The electricity in an
electric power system may undergo four or five transformations between generator and
consumers.
High voltage transmission lines are terminated in substations, which are called
high-voltage substations, receiving substations, or primary substations. The function of
some substations is switching circuits in and out of service; they are referred to as
switching stations. At the primary substations, the voltage is stepped down to a value
more suitable for the next part of the trip toward the load. Very large industrial customers
may be served from the transmission system. The portion of the transmission system
that connects the high-voltage substations through step-down transformers to the
distribution substations is called the subtransmission network. There is no clear distinction
between transmission and subtransmission voltage levels. Typically, the
subtransmission voltage level ranges from 69 to 138 kV. Some large industrial customers
may be served from the subtransmission system. Capacitor banks and reactor banks are
usually installed in the substations for maintaining the transmission line voltage.
Distribution Subsystem
Load Subsystem
Industrial loads are composite loads, and induction motors form a high proportion
of these loads. These composite loads are functions of voltage and frequency and form
a major part of the system load. Commercial and residential loads consist largely of
lighting, heating, and cooking. These loads are independent of frequency and consume
negligibly small reactive power. The load varies throughout the day, and power must be
available to consumers on demand. The daily-load curve of a utility is a composite of
demands made by various classes of users. The greatest value of load during a 24-hr
period is called the peak or maximum demand. To assess the usefulness of the
generating plant the load factoris defined. The load factor is the ratio of average load over
a designated period of time to the peak load occurring in that period. Load factors may
be given for a day, a month, or a year. The yearly, or annual load factor is the most useful
since a year represents a full cycle of time.
In order for a power plant to operate economically, it must have a high system load
factor. Today’s typical system load factors are in the range of 55 to 70 percent. Load-
forecasting at all levels is an important function in the operation, operational planning,
and planning of an electric power system. Other devices and systems are required for the
satisfactory operation and protection of a power system.
Some of the protective devices directly connected to the circuits are called
switchgear. They include instrument transformers, circuit breakers, disconnect switches,
fuses and lightning arresters. These devices are necessary to de-energize either for
normal operation or on the occurrence of faults.