Electricity prices seen to stabilize

MANILA, Philippines - Electricity prices are expected to stabilize in the long run as power regulators work on a more permanent offer price cap to prevent future power rate increases.

The Wholesale Electricity Spot Market (WESM) is the country’s trading floor for electricity, while the price cap is the highest offer that power sellers can give. 

Regulators lowered the price cap to P32 per kilowatt-hour from P62 per kwh previously but the new rate is temporary and good only for 90 days.

In a joint resolution, the Energy Regulatory Commission (ERC), Department of Energy (DOE) and WESM operator Philippine Electricity Market Corp. (PEMC) said: “It is understood that this new offer price cap is interim in nature while the WESM Design Study in ongoing. The new and revised Offer Price Cap will be subjected to a public consultation and will be subject to the regular review and adjustments by the WESM Tripartite Committee.”

PEMC is awaiting results of a commissioned study on WESM on how to improve the efficiency of the trading floor. The ERC, DOE and the PEMC make up the tripartite committee that monitors price volatilities on the spot market.

“PEMC is directed to submit a study on the appropriate Offer Price Cap within 30 days from the issuance of this joint resolution,” the ERC, DOE and PEMC said in the Dec. 27 joint resolution.

Power regulators decided to lower the offer price cap because of high market prices at the WESM, which may translate to considerable increases in the distribution utilities’ generation charges.

Efforts to improve operations at the WESM to avoid spikes in prices arose from the record increase in generation charge of Manila Electric Co. (Meralco), the country’s biggest power distributor, of P3.44 per kilowatt-hour in December.

This, in turn, arose from the one-month maintenance shutdown of the Malampaya gas field, which supplies natural gas to three power plants in Luzon, and from high prices at the WESM, where Meralco also sources part of its power requirements.

Meralco officials attributed the high prices at the trading floor to tight supply because of emergency shutdowns of power plants.

The three plants sourcing power from Malampaya are the 1,200 MW Ilijan combined cycle natural gas plant owned by Kepco Philippines Corp. and the 1,000 MW Sta. Rita and 500 MW San Lorenzo natural gas facilities owned by First Gen Corp. of the Lopez group.

In a radio interview,  Sen. Sergio Osmeña III said yesterday the P32 per kilowatt-hour ceiling price at the WESM will likely be made permanent.

 â€œIt is good that they already acted on the price cap,” he said, adding “P62 is too high, I can see that P32 per kwh will be very acceptable... there will still be bidders.”

Osmeña said he has checked the sensibility analysis which showed that the new cap will still be a competitive price for WESM trading.

“We cannot be sure if the market will work perfectly... Even in the other countries they experience hiccups and pneumonia... We can adjust this,” he said.

Osmeña said the WESM is like the stock market.

“We are always waiting and watching,” he said. “We are ready to jump if the public requires it.” 

Osmeña said he hopes that President Aquino would have Congress amend Presidential Decree 910 allowing the administration to tap about P10 billion of the Malampaya fund to subsidize the recent increases of Meralco.

The Senate can pass the amendments to the Electric Power Industry Reform Act (EPIRA) and other pertinent bills once Aquino certifies them as urgent, he added.