ERC approves P34.25-million funding to set up Mindanao power market

Business Mirror

Published on Wednesday, 24 April 2013 20:37

Written by Lenie Lectura / Reporter

THE budget set aside for the Philippine Electricity Market Corp. (PEMC) intended to set up the Interim Mindanao Energy Market (IMEM) has been increased to P34.25 million, the Energy Regulatory Commission (ERC) announced on Wednesday. 

In a decision dated April 1, the regulator granted PEMC final authority to use the unutilized portion of market transaction fees collected in 2012 amounting to P34.25 million for the establishment of the IMEM.

Essentially, the ERC allowed the PEMC to tap unused market fees collected by the latter from power-generation firms that traded in the wholesale electricity spot market (WESM).

The latest amount was higher than the P24.26 million earlier stated by the ERC in its February 25 announcement, pending the ERC’s final evaluation of PEMC’s application.

The ERC’s decision affirms IMEM’s budget requirement of P9.98 million for pre-operating expenses and P8.28 million for capital expenditures granted in the provisional authority (PA). The PEMC asked for a P20-million consultancy budget and was initially granted half of this amount in the PA pending submission of the supporting documents.  Based on the supporting documents submitted by PEMC, the ERC found it prudent to grant only a budget of P19.992 million for technical services consultancy.

The IMEM is an innovative government measure to address the power-shortage situation in Mindanao, embodied in the Department of Energy’s (DOE) Department Circular 2013-0001.  Power generators and other entities are given the opportunity to sell their excess generation capacities based on the resulting market prices to optimize the use of available generated power in Mindanao.

The IMEM features a day-ahead pricing market wherein the generators or market participants are supposed to submit their bids or offers a day before the actual delivery or curtailment of energy. 

The IMEM also mandates generators, directly connected customers and distribution customers to offer their excess generation capacities in order to augment and address the supply deficiency in the Mindanao grid.  The generators’ nominations will help correct energy imbalances through the use of the merit order system, which gives dispatch priority to the lowest bidders.

The PEMC is authorized to charge market transaction fees (MTFs) from WESM members or participants, pursuant to Section 30 of Republic Act 9136, otherwise known as the Electric Power Industry Reform Act (Epira) of 2001.  MTFs are the costs pertinent to the administering and operating the WESM, and which have passed the ERC’s approval. 

The approved amount to establish the IMEM from the unused 2012 MTFs is subject to refund to Luzon and the Visayas WESM participants once the IMEM has started commercial operations. The PEMC will have to eventually file an application with the ERC for the approval of a refund mechanism to the Luzon and the Visayas WESM members.

“The ERC is united with the DOE in its aim toward solving the Mindanao crisis and, at the same time, putting a balance on financial and price impacts with consumer welfare paramount in mind” ERC Chairperson Zenaida G. Cruz-Ducut said.   source