ERC amends WESM price-setting system

MANILA, Philippines — The Energy Regulatory Commission (ERC) will come out with changes to the imposition of the price mitigating measure in the wholesale electricity spot market (WESM) to better protect consumers from unreasonable price spikes in the market during tight supply.

In a statement, the ERC said it is introducing amendments to the pre-emptive mitigating measures in the WESM, particularly on the Cumulative Price Threshold (CPT) and the imposition of the Secondary Price Cap (SPC) mechanism.

In the amendment, the ERC decided to lower the rolling average period from 120 hours or five days to 72 hours or three days.

The imposition of an SPC of P6,245 per megawatt-hour (MWh) once the P9,000 per MWh rolling average price is breached over a three-day period aims to protect the public and prevent the repetition of excessive and unreasonable high market prices.

“Because of the imposition of the SPC in May 2021, the average price in WESM was at P7,428 per MWh instead of P8,120 per MWh. That is for the five days rolling average. If reduced to three days rolling average, resulting price would have been P6,338.66 per MWh,” ERC chairperson and CEO Agnes Devanadera said.

Meanwhile, the power regulator also decided to implement a regional/island SPC mechanism to be applied when the grid interconnection is on outage.

It said the regional/island SPC mechanism shall have the same SPC value, CPT and rolling average period similar to that of the system-wide imposition and shall be applied during certain conditions.

The Independent Electricity Market Operator of the Philippines (IEMOP), operator of WESM, said the SCP was imposed for 55 times in May.

It said supply in the grid was greatly affected by generator outages reaching as high as 2,396 MW and deratings of 4,984 MW, which triggered yellow and red alert warnings, particularly in May and June.

This resulted in an effective settlement spot price (ESSP) of P8.31 per kilowatt-hour (kWh) last month.

In amending the SPC, the ERC said it conducted a study and proposed to improve the existing mitigating measures which were presented to the concerned stakeholders in Luzon, Visayas and Mindanao through public consultations held in November 2019.

According to the ERC, the amendments to the SPC will be covered in an amended resolution which it will promulgate in the coming days.

In 2017, the ERC adopted pre-emptive mitigating measure in the WESM as part of efforts to update its regulatory policies to adapt to new developments in the electric power industry

The changes was also due to the highly volatile nature of the spot market and the possibility of market power abuse in order to ensure consumer protection.