PEMC operator: We complied with ERC 1.77-billion refund order

By Lenie Lectura – August 15, 2019
from Business Mirror

THE Philippine Electricity Market Corp. (PEMC)/Market Operator said Wednesday it has complied with the refund order of the Energy Regulatory Commission (ERC).

“We are rectifying the misallocation of the NSS [net settlement surplus] through a refund to the market participants who received less than what was due them while collecting from the others who have received more,” said PEMC President Oscar E. Ala.

The ERC found inconsistencies on how PEMC allocated the NSS.  It ordered PEMC to refund a total of P1.774 billion.

The NSS is the surplus or deficit remaining after all market transactions have been accounted for. This accounts for price differences occurring between generator and customer locations or nodes due to losses and congestion given the Wholesale Electricity Spot Market’s (WESM) locational marginal pricing scheme.

The NSS is distributed to trading participants that are entitled to receive a share of the surplus or deficit in accordance with an ERC-approved methodology.

Of the total refund of P1.774 billion, the amount due Luzon and Visayas consumers is P1.403 billion. Seventy-seven percent or P1.08 billion of this will be refunded to consumers in the Meralco franchise area, while 23 percent or P321.36 million will be refunded to consumers covered by other distribution utilities and electric cooperatives.

The rest, P371 million, is owed to certain generation companies, retail electricity suppliers and directly connected customers.

At least 81 percent of the amounts to be refunded will be collected by the PEMC/MO from generation companies and retail electricity suppliers which were allocated far greater settlement amounts than what were supposed to be due them. The remainder will be collected from distribution utilities (DUs).

Ala said PEMC immediately implemented the ERC order on the adjustments to the NSS allocation beginning with the July 2019 billing period.

“Following the ERC order to cushion the impact of NSS allocation adjustment to those who have to collect, a rate adjustment cap of P 0.05 per kWh [kilowatt-hour] is to be observed by the distribution utilities,” said PEMC.

Ala said PEMC’s inconsistency is similar to a situation “wherein you are supposed to give your son and daughter P5 and P10, respectively. However, you inadvertently gave your son P10 and your daughter P5. And as a parent, one has to correct the amounts given to each.”

He added that the collection for non-DUs will also be expedited to one month. This is to ensure that DUs expecting a refund can immediately pass on the benefit of the refund to their end-consumers.

PEMC/MO also submitted to the ERC the plan of action for the succeeding months to allow for the settlement of the remaining balance of the NSS allocation adjustment for the next 11 months to commence with the August 2019 billing period.

In compliance with the ERC Order, the PEMC/MO will fortify existing mitigating measures such as the conduct of periodic audits to market systems and implementing a stringent change management process.