ERC wants to impose secondary price cap for WESM

MANILA, Philippines - The Energy Regulatory Commission (ERC) wants to impose a secondary price cap for the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity.

The ERC proposed a resolution imposing a secondary price cap of P6.245 per kilowatt-hour for the WESM upon reaching an average price threshold.

The ERC has issued a notice seeking market participants’ comments on the proposed resolution.

“In the said Resolution, the Commission, for the protection of public welfare, deems it appropriate to mitigate sustained high prices in the WESM on an interim basis during the months of May and June 2014 by setting a secondary price cap in the amount of P6,245 per megawatt-hour (P6.245 per kwh) upon reaching an average price threshold of P7,808 over 72 hours rolling period,” the ERC said in its resolution.

The price cap is the highest offer that sellers can give when they sell their electricity to the market. Power suppliers in the market with the lowest price get to supply the requirements of distribution utilities but the last offer is the one that sets the price for which they will be paid.

In the proposed resolution, the ERC said the secondary cap may be lifted whenever the rolling average is less than the defined threshold.

Pending the approval of the offer cap of the WESM tripartite committee, the ERC said there is a need to mitigate the sustained high prices in the WESM on an interim basis during the months of May and June.

Any secondary price cap and average price threshold approved by the ERC shall be revised accordingly upon the approval of the final WESM offer cap, the ERC also said in its resolution.

The price cap at the WESM has been cut by half since December but only on a temporary basis.

In December, the tripartite committee composed of the Department of Energy, the Philippine Electricity Market Corp. (PEMC) and the ERC cut the price cap at the WESM to P32 per kwh from P62 per kwh amid the surge in electricity prices that month.

At the time, the December generation charge of Manila Electric Co. (Meralco) rose to P9.10 per kwh from only P5.67 per kwh in November.

This temporary price cap has been extended for sixty days from March 27 or until May 27.

The spike in electricity prices at the WESM has been blamed for the record increase in Meralco’s generation charge for December 2013 and January 2014.