DOE, ERC eye WESM power price-cap adjustment amid Malampaya shutdown

By Lenie Lectura – February 1, 2017

from Business Mirror

THE Energy Regulatory Commission (ERC) is currently evaluating if there is a need to adjust the price ceiling on power traded at the spot market.

This, after the energy department raised the possibility of further lowering the secondary price cap at the Wholesale Electricity Spot Market (WESM), the country’s electricity trading floor.

“We are reviewing how to lower the secondary price cap in the WESM with the ERC,” Energy Undersecretary Felix William Fuentebella said last month.

The price cap is the highest offer that sellers could give when they sell their electricity to the market.

When sought for comment, ERC Spokesman lawyer Rexie Digal said there is an ongoing review on the price cap, including the primary cap set at P32 per kilowatt-hour (kWh).

“Given that the present offer price cap and secondary price cap were determined based on 2014 data, the commission is already in the process of reviewing these levels using the most recent available input parameters and update them if necessary,” Digal said in a text message.

Price spike control

WESM’s  primary offer cap was lowered to P32/kWh from P62/kWh in a bid to  prevent excessive price spikes. It can be recalled that  WESM prices  soared by P4.16/kWh in December 2013, as a result of  the Malampaya natural gas-field shutdown.

The Manila Electric Co. (Meralco), which sources bulk of its power requirements from the gas facility, announced to implement record-high price increase.

These rates include the P0.45/kWh deferred increase for January 2014 billing period that Meralco wanted to collect over a six-month period. An earlier P4.15/kWh rate hike was also set to have been implemented in phases starting in December 2013, but was stopped by the Supreme Court.

The ERC has yet to release the result of its investigation into the possible collusion or abuse of power allegedly committed by industry players, which resulted in an exorbitant rate hike in history yet.

Besides the primary cap, the ERC also ordered the implementation of a secondary cap to further protect consumers from excessive price spikes triggered by supply tightening.

Called the price threshold mechanism, the P6.245/kWh secondary cap kicks in the market once an average threshold of P9/kWh is reached over a 168-hour period.


“Actually, the price caps were made permanent, but there is a colatilla that there will be a continuing review. There is a provision that there will be a review, so, depending on the situation, they will study it,” Philippine Electricity Market Corp.  President Melinda Ocampo had said. PEMC is the WESM operator.

Ocampo added that the Malampaya shutdown this year would not lead to a repeat of the 2013 incident, because existing mitigating measures are now put in place to prevent abnormal price spikes.

“There is a threshold that will prevent higher WESM prices,” she said