DOE, ERC tackle parameters of secondary WESM cap

MANILA, Philippines - The Department of Energy (DOE) and the Energy Regulatory Commission (ERC) are discussing ways on how to improve the parameters of the secondary cap imposed at the country’s trading floor for electricity.

Energy Secretary Carlos Jericho Petilla said he has asked the ERC, the power regulator,  to review the parameters of the secondary price cap, which generators have continuously opposed.

 “The secondary cap is nothing new but it’s the parameters that need to be reviewed,” Petilla said.

In May, the ERC imposed a secondary price cap of P6.245 per kilowatt-hour at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity,  and extended this indefinitely.

The price cap is the highest offer sellers can give when they sell electricity to the market. Power suppliers with the lowest price get to supply the requirements of distribution utilities but the last offer is the one that sets the price for which they will be paid.

The ERC has extended the secondary price cap indefinitely or until a permanent measure is in place. It is currently conducting public consultations on a more permanent measure.

Power generators have said the price cap is too low but the ERC said the amount has taken into account the need for power producers to recover their costs.

Still, Petilla said the parameters in implementing the cap may be too low.

 “It exists in other countries but the parameters must not be biased against diesel plants so the ERC can change the parameters. Merchant plants must be allowed to recover their costs,” he said.

Merchant plants are facilities that do not have power supply contracts.

Petilla also said that for the summer of 2015 when there is a projected power shortage, Manila Electric Co. (Meralco) should be able to able to fully contract based on its projected requirements.

“You have customers so you decide on what is best for your customers,” he said.

Meralco wants to be able to contract its power requirements 100 percent so it does not have to source from the WESM or the spot market.

“The decision to go WESM and to contract is a decision that Meralco will have to make based on what is good for its customers and based on projects,” Petilla noted.

The Luzon grid will need 9,011 megawatts of power next year, higher than this year’s demand of 8,717 MW on the back of the projected growth in the economy.

Because of the shortage, President Aquino has asked Congress for authority to tap additional capacity, a request both chambers are still studying.