ERC sets P25/kWh cap on power reserve market price

MANILA, Philippines —  The Energy Regulatory Commission (ERC) has set a ceiling price of P25 per kilowatt-hour (kWh) on the backup power that can be offered to the National Grid Corp. of the Philippines.

In a recent commission meeting, the ERC resolved to adopt an offer price floor of zero per megawatt-hour and a price cap of P25,000 per MWh, equivalent to P25 per kWh, in the country’s reserve market.

The offer floor and price cap are the minimum and maximum price offered by generation companies in the reserve market.

“The interim offer price floor and cap shall be reviewed and recomputed one year after its implementation, contingent on the collection of sufficient data from the annual submissions of generation companies,” the ERC said.

Reserves, commonly referred to as ancillary services (AS), provide backup power to maintain balance and stability in the power grid, ensuring normal frequency and voltage levels despite supply-demand imbalances.

The commission said it would start the review of the existing pricing guidelines every five years from the implementation of the revision in the interim rules adopted, or when otherwise deemed necessary.

The ERC has likewise ordered the inclusion of a generation company’s weighted average cost of capital in its annual submission of a management report.

“Upon collection of sufficient reportorial requirements and data from generation companies, the commission will initiate a review,” it said.

The P25 per kWh price cap on the reserve market was lower than the initial ceiling set by the Department of Energy (DOE) but higher than the earlier proposal by the regulator.

During the initial commercial operation of the reserve market, the DOE imposed a temporary price cap of P32,000 per MWh or P32 per kWh.

However, the ERC deemed this amount “excessive” and has decided to set a “reasonable” cap to limit inflated prices in the market and prevent windfall profits for AS providers, aiming to protect consumer interests.

As a result, the ERC earlier adopted a ceiling price of P19,000 per MWh or P19 per kWh for the trading of reserves in the Wholesale Electricity Spot Market (WESM).

The reserve market, integrated into the WESM, aims to optimize schedules and prices for energy and reserve needs, promoting competition and affordability while ensuring grid security and reliability.

In March, the ERC ordered the suspension of billing and settlement at the reserve market following significant price increases in reserve costs during the month compared to February.

The suspension was partially lifted two months later, allowing power generators to recover a portion of the costs for trading transactions during the March billing month.

The decision to allow the settlement of 30 percent of the transaction amounts was said to have been made to ensure continuous operations of power generators providing reserves in the system.

The commission eventually lifted the trading suspension in the reserve market in July, paving the way for the resumption of its full commercial operation in August.

Just this month, the ERC approved the collection of the remaining 70 percent of the recalculated reserve trading amounts totaling P3.05 billion, starting next month.

This amount will be recovered over a staggered period of three months for trading participants in the Luzon and Mindanao WESM and six months for those in the Visayas.