by Myrna Velasco
March 10, 2014
Prices in the Wholesale Electricity Spot Market (WESM) have been ordered to be cut by half for the controversial supply months of November and December 2013.
The decision of the Energy Regulatory Commission (ERC) will effectively set WESM’s load weighted average prices (LWAP) at just roughly P6.00 to P7.00 per kilowatt hour from originally at P15.523 per kWh in November and P17.749 per kWh in December.
The ERC verdict directing market operator Philippine Electricity Market Corporation (PEMC) on the reduction of spot market prices was signed Monday (March 10) and will be made public today.
A manifestation on the proposed WESM regulated price will also be filed with the Supreme Court this week because it straddled November supply month which was covered by the restrained rate hike of the Manila Electric Company.
“In the order, the calculation is not specified but the principle is to have the LWAP cut by half…so the price will be less than P10/kWh or about P6.00 to P7.00 per kWh resulting LWAP,” a highly-placed source has divulged.
The regulatory body emphasized that “the regulated price shall be calculated based on the load weighted average of the ex-post nodal energy prices and meter quantity of the same trading interval that have not been administered … subject to the payment to the oil-based plants of additional compensation to cover their full fuel and variable O&M (operation and maintenance) costs.”
Among the ERC Commissioners, the official added, “there was a computation and we will give it to PEMC to serve as its guidance on computing the spot prices reduction.”
The basis of the ruling, the ERC official said, “is market failure because of the circumstances in November and December.
Supply tightness has always been there, so we surmised that what happened during the Malampaya shutdown was a market failure.”
The per-kilowatt-hour impact on the final bill of the consumers will be estimated by PEMC as well as the affected distribution utilities, including Meralco.
When ERC was asked on the signal it has been sending to the market with this decision, it noted that it is amenable to the idea that this will be challenged by the power generators which are trading in the spot market.
The ERC noted that the only ‘comfort level’ it can give to investors at this point is that “these things are not going to happen everyday.”
The enforced price control or regulated price, according to ERC officials, “will only be the first step…the second one will be penalties and sanctions against parties which will be found guilty of anti-competitive behavior in the market based on the result of our investigation” on the alleged collusion of power plant operators.
The ERC is expected to conclude its probe on the matter by the end of this month.
It qualified that the WESM price cut was not a sanction to any wrongdoing yet, but a premise just anchored on market failure.” source
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