ERC shortens threshold on enforcement of WESM mitigating price caps

By Myrna M. Velasco – June 30, 2021, 4:50 PM
from Manila Bulletin

The Energy Regulatory Commission (ERC) has shortened to three days or 72 hours – from originally five days or 120 hours –the time threshold on when the secondary price cap (SPC) of P6.245 per kilowatt hour (kWh) shall be enforced in cases of recurring price spikes for traded capacity in the Wholesale Electricity Spot Market (WESM).

In a statement to the media, the regulatory body similarly laid down the imposition of regional or island secondary price cap mechanism “which shall be applied when the grid interconnection is on outage.”

The ERC qualified that the enforcement of the SPC “upon breach of a P9,000 megawatt-hour (or equivalent P9.00 per kWh) rolling average price over a 3-day period aims to protect the public and prevent the repetition of excessive and unreasonable high market prices.”

For the mandated regional or island-based SPC mechanism, the ERC indicated that this will be set at the same value and the rolling average shall likewise be reckoned within the same threshold of 3 days, although it will only be applied on certain conditions.

“The amendments to the SPC will be covered in an amended resolution that the Commission will be promulgating in the coming days,” the regulatory body said.

ERC Chairperson Agnes T. Devanadera illustrated that “the imposition of the secondary price cap in May 2021 resulted in an average price of P7,428/MWh (or P7.248 per kWh), which is lower by 9.0-percent from the P8,120/MWh (or P8.120 per kWh) without SPC imposition.”

She emphasized with the lowering of the SPC threshold to three days, that average in WESM prices should have gone even lower at P6.338 per kWh, or an estimated reduction of 22-percent.

“We need to implement mitigating measures such as the secondary price cap in consideration of the paying capacity of the majority of the consuming public in pursuance of our mandate to exert efforts to minimize price shocks for the protection of consumers,” the ERC chief stressed.

The summer price spikes in the spot market had been mainly triggered by tightening of power supply in the country’s main power grid due to simultaneous shutdowns of power plants; and aggravated by the de-rating of the other electric generating facilities.

Without the price mitigating measure, the electricity consumers primarily in Luzon, should have been saddled with skyrocketing electric bills in the months of June and July; but such cost impact had been cushioned because of the SPC.

As the ERC stipulated, the SPC and the shortened duration for it to be administered for traded capacities in the WESM, “aims to protect the public and prevent the repetition of excessive and unreasonable high market prices.”

The regulatory body justified that it had undertaken comprehensive study before it proposed the modifications in the SPC threshold; as well as on prescribing the regional or island SPC mechanism.

It added that before a final decision was rendered, the measure was presented to relevant stakeholders in Luzon, Visayas and Mindanao through public consultation processes.

“The comments gathered from the stakeholders during the public consultations were considered in the amendments to the pre-emptive mitigating measure in the WESM,” the ERC noted.