ERC reviews WESM secondary cap suspension (Sabong News)

The Energy Regulatory Commission (ERC) is reviewing the proposed lifting of the P6.245 per kilowatt hour (kWh) secondary price cap (SCP) at the Wholesale Electricity Spot Market (WESM) after an appeal from the power generators due to soaring fuel prices in the world market. The generation companies (GenCos) reportedly met with ERC Chairperson Agnes T. Devanadera to discuss their appeal for the temporary lifting of the spot market’s secondary cap — because if that is sustained amid the skyrocketing coal, oil and gas prices globally, the power industry players would be incurring losses and that will be a counterproductive move when it comes to the country’s bid for additional capital flow in the sector. ERC Commissioner Floresinda B. Digal noted there is “continuous study and ongoing review” relative to the SCP, although that was just modified last year also by the Commission. The Philippine Independent Power Producers Association Inc. (PIPPA), in particular, had stated that “due to the current crisis involving Russia and Ukraine, the Philippines is experiencing an alarming increase in fuel costs,” that if passed on will trigger dramatic spikes in the electric bills of consumers. The power generators argued that the escalating fuel prices in the world market “are events beyond our control,” hence, they are batting for reasonable cost recoveries for increase in their fuel expenses – and one measure they are eyeing would be the propounded interim suspension of the SCP in the spot market. “The EPIRA (Electric Power Industry Reform Act) created the WESM as a market that provides proper and accurate price signals which determines future investments in the power industry. The secondary price cap only distorts the true cost and is not reflective of the real situation of the energy sector,” PIPPA opined. As a matter of fact, the aggrupation of GenCos narrated that “as early as 2014, PIPPA has been advocating the removal of the secondary price cap to provide proper price signal for additional investments in the generation sector.” It qualified that if ‘true price signals’ are manifested via the spot market, “more investments will lead to sufficiency in supply and competitive rates.” The group stressed “the increase in fuel/coal prices is not only an issue of electricity price but also in making sure that investments will not falter. As such, PIPPA will continue to advocate for the removal of the secondary price cap.” It was in June last year when the ERC decided to shorten to just three days (or 72 hours) the time threshold as to when the SCP shall be enforced to prevent sustained spikes of prices in the WESM. The threshold had been originally at five (5) days or 120 hours. In that same ruling, the industry regulator further mandated the imposition of regional or island secondary price cap mechanism “which shall be applied when the grid interconnection is on outage.” The ERC emphasized that the enforcement of the SPC “upon breach of a P9,000 megawatt-hour (or equivalent P9.00 per kWh) rolling average price over a 3-day period aims to protect the public and prevent the repetition of excessive and unreasonable high market prices.” ###