ERC raises WESM average price threshold

MANILA, Philippines - The Energy Regulatory Commission (ERC) has raised the average price threshold at the electricity spot market to P9 per kilowatt hours from the previous P8.1 per kwh.

This means the secondary cap of P6.245 per kwh at the Wholesale Electricity Spot Market (WESM) would only take effect whenever there is a breach of an average price threshold of P9 per kwh.

“It’s now P9 for seven days, cumulative average. If this is breached then the P6.245 per kwh will be activated,” ERC executive director Saturnino Juan said yesterday on the sidelines of a hearing at the Senate.

The new average price threshold is permanent until the ERC decides anew to lift it, he said.

“This is to protect consumers from price spikes at the WESM,” Juan said.

In a briefing on Monday, the ERC raised the average price threshold at the spot market and made this a permanent mitigating measure to cushion consumers from price spikes.

In raising the average price threshold, the ERC took into account the concerns of power producers.

He said the ERC intends to issue the resolution for the higher price threshold within the week so it can comply with the publication requirements and have the measure implemented in the first or second week of January next year.

The price cap is the highest offer that sellers can give when they sell their 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.

In May, the ERC imposed the secondary cap of P6.245 per kwh at the WESM after rates at the spot market skyrocketed in December 2013, resulting in the record high generation charge of Manila Electric Co. (Meralco) to P9.10 per kwh during the month from only P5.67 per kwh in November 2013.

The secondary cap expired in Dec. 8. Prior to expiration, the measure took effect whenever there was a breach of the average threshold of P8.1 per kwh over a 72-hour period at the spot market.

The secondary price cap implemented in May is on top of the primary price cap, which was cut to P32 per kwh from P62 per kwh in December 2013 by the tripartite committee composed of the Department of Energy, the Philippine Electricity Market Corp. (PEMC) and the ERC also because of the surge in electricity prices that month.