ERC sets 30-day extension on settlement of adjusted WESM bills

Manila Bulletin
by Myrna Velasco
May 12, 2014

The Energy Regulatory Commission (ERC) has extended for 30 days the settlement of payments or probable refund process by power generators on the reduced or disguised as ‘regulated prices’ in the Wholesale Electricity Spot Market (WESM) for the supply months of November and December.

In an order issued by the regulatory body, it directed market operator Philippine Electricity Market Corporation (PEMC) “to provide the market participants a non-extendible period of 30 days (from receipt of the ruling) within which to settle their adjusted WESM bills.”

The ERC noted that it needed time leeway so it can judiciously review and act on the motions filed of various market participants – primarily questioning the legal grounds of imposing regulated prices in an openly-competitive spot market.

The preliminary Order of the Commission is for market participants to settle their adjusted WESM bills within 45 days and that will supposedly lapse today (May 13).

It must be recalled that the ERC voided the prohibitive WESM prices during the Malampaya shutdown in November and December 2013, allegedly due to lack of competition in the market.

Such resulted in the reduction of electricity rates to be passed on by Manila Electric Company (Meralco), which at that time, was deemed highly exposed to volatile prices in the WESM.

The decision of the regulator had mixed impacts on the power generators – the companies which procured ‘replacement power’ from the spot market during those critical times were able to tame their losses.

However, the diesel plants and the hydropower facilities which were called extensively for dispatch on those periods were perceived as the ones financially-punished by the ERC ruling.

The regulator set a condition in its Order that the diesel plants shall be allowed to recover additional costs for their fuel; but no parallel recovery scheme has been set for hydro for decimated ‘opportunity costs’.

It was gathered that some companies may need to refund aggregate P6.0 billion due to the reduced WESM prices – and such is not necessarily acceptable because rules are being altered mid-game and on politically-capricious manner.

Power investors are not just worried about the short-term drawback of such regulatory ruling. They also view the edict as disturbing to the lenders and something that sets off added risks to forthcoming investments in the sector. source