ERC plans to raise secondary price cap in the electricity market to lure investors

By Alena Mae S. Flores – December 18, 2023, 9:20 pm
from manilastandar.net

The Energy Regulatory Commission (ERC) plans to raise the secondary price cap in the spot market to P9.8526 per kilowatt-hour from P6.245 per kWh.

It said in its draft rules the SPC would be initially set at P9.8526 per kWh as proposed by the Philippine Independent Power Producers Association Inc. (PIPPA), subject to updating.

The ERC imposed an SPC of P6.245 per kWh on the breach of the P9-per-kWh rolling average price over three days at the electricity spot market to protect the public and prevent the repetition of excessive and unreasonable high market prices.

“In order to address the need for long-term supply and promote competition in the generation sector, there is a need to revise the methodology of determining the secondary cap and the conditions that will trigger its implementation,” it said.

PIPPA president and executive director Anne Estorco Montelibano said the P9.8526 per kWh would be imposed in the event the ERC is not yet inclined to fully rescind the SPC.

“The alternative contains parameters in calculations, and we are proposing automatic adjustments,” Montelibano said.

The ERC has been reviewing the SPC at the spot market, which was first implemented a decade ago to protect consumers from the unwarranted increase in electricity prices brought about by inherent volatile market price movements at the Wholesale Electricity Spot Market.

The regulator said Republic Act No. 9136 states that generation prices should be market-driven or dictated by market forces.

It said its initial analysis showed that with SPC in place, price signals are distorted and actual market results do not necessarily reflect the true cost of generation. This blurs planning exercises on energy security and dampens investors’ interest in the Philippine power generation sector, it said.

“The ERC needs to do a balancing act, as is the role of the regulator in our system. We need to ensure that the regulatory framework incentivizes investors to pour in more capital by building additional power plants to bolster the country’s supply requirements,” ERC chairperson Monalisa Dimalanta said earlier.

“At the same time, we cannot discount the fact that the price cap is a preventive measure to protect the consumers from the immediate impact of high market prices,” Dimalanta said.