Power spot market price cap extended

Business World Online
Posted on August 08, 2014 07:41:00 PM

THE ENERGY Regulatory Commission (ERC) has further extended implementation of a second layer of price cap for power traded at the Wholesale Electricity Spot Market (WESM) -- initially meant only for summer -- as it prepares a permanent mitigating measure to shield consumers from supply-related volatility.

The regulator issued a resolution, dated Aug. 5, ordering the extension from Aug. 10 of the effectivity of the secondary cap mechanism adopted in May for 120 days "or until the establishment by the ERC of the permanent pre-emptive mitigating measure in WESM, whichever comes earlier".

Originally planned to be in effect only until June, the secondary cap was initially extended last month amid expected maintenance shutdown of major plants in Luzon that could drive up WESM prices.

The P6.245/kWh secondary cap kicks in once an P8.186/kWh average is hit over a 72-hour period. These levels were computed based on historical summer prices, with allowance for three intervals hitting high market clearing prices.

In its latest resolution released on Friday, the ERC also directed all interested stakeholders to submit their proposed permanent measures within 20 days from the resolution’s date of effectivity.

It noted that there was a public consultation and focus group discussion last month during which Philippine Electricity Market Corp. officials and some stakeholders presented proposals to replace the secondary cap mechanism.

"[T]he ERC has taken cognizance of the need to establish permanent... measures in order to mitigate the impact of extreme price volatilities and excessive levels of prices in the WESM to discourage manipulative acts," the resolution read.

"Alternative mechanisms submitted by the stakeholders necessitate further study to complete the process of finally establishing a permanent measure which could be applied in the WESM and, thus, the ERC found the need to extend the implementation of the current secondary cap mechanism," it added.

The WESM currently has a P32/kWh offer limit -- also an interim cap that is almost half of the P62/kWh originally set when the market started operations in 2006.

The secondary cap was put in place as a mitigating measure to help avert price spikes in WESM during summer, when prices are most vulnerable to supply-related volatility.

PEMC is still in the process of determining a final price cap that will be used in the market to replace the current P32/kWh ceiling, in effect since late December last year amid high prices that drove record generation rate adjustments sought by Manila Electric Co. (Meralco). High WESM prices have been blamed for a P4.15/kWh rate hike that Meralco was supposed to start implementing in stages last December. The adjustment is currently subject to an indefinite restraining order.

The distributor also sought a P5.33/kWh increase for January but slashed this to P0.45/kWh after PEMC revised WESM prices for the December supply month. The ERC has yet to rule on the revised petition. -- Claire-Ann Marie C. Feliciano source