ERC proposes to cap reserve market price at P19 per kWh
By Alena Mae S. Flores – June 30, 2024, 7:10 pm
from manilastandard.net
The Energy Regulatory Commission (ERC) proposed an interim price cap of P19 per kilowatt-hour (kWh) for the reserve market, subject to consultations and additional data from power generators.
During the initial commercial operation of the reserve market, the Department of Energy (DOE) temporarily implemented a price cap of P32,000 per megawatt-hour (MWh), which is equivalent to P32 per kWh, and a price floor of P0 per MWh. The ERC, however, rejected the DOE’s proposed P32,000 per MWh cap, deeming it excessive.
The ERC said it aims to “set a reasonable offer ceiling that will limit excessive pricing in the market and prevent windfall profits for ancillary service (AS) providers, with the end view of protecting consumer interest.”
The ERC drafted a resolution on “Setting an Interim Offer Price Cap as Mitigating Measure for the Trading of Reserves in the Wholesale Electricity Spot Market (WESM).” Simulations conducted on the proposed P19,000 per MWh cap showed that it would result in an annual net revenue requirement (ANRR) greater than the computed annual market revenue.
“This is enough to compensate AS providers for all reserve types, which already considers the recovery of the ANRR of peaking generators as well as its short-run marginal cost [SRMC] of operating on an hourly basis, permitting cost recouperation and effective resource allocation over both long-term and short-term market participation. Thus, the recommended proposed level of offer price cap for the reserve market is P19,000 per MWh,” the ERC said.
The ERC said the price cap for the reserve market could be further refined with more data from generation companies covering longer periods. This would allow the commission to integrate more data into its methodology and arrive at a more feasible offer cap value.
“The interim offer price 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.
“Upon collection of sufficient data from generation companies, a technology-specific offer price cap may be computed by the Commission subject to public consultations and comments from stakeholders,” the regulator said.
The ERC said the move is part of its mandate to protect consumer welfare while ensuring that investments in the WESM and the reserve market are not discouraged.
The reserve market, now integrated into the WESM, aims to optimize energy and reserve procurement. This integration is expected to promote competition and affordability while ensuring grid security and reliability.
The DOE said the successful implementation of the reserve market aligns with the President’s eight-point agenda, particularly in providing investment opportunities for generation companies, supporting infrastructure development and creating potential for local employment.
