ERC asks distributors to assume spot market trading losses

by Alena Mae S. Flores – July 06, 2016 at 11:35 pm

from Manila Standard Today

The Energy Regulatory Commission asked distribution utilities to assume any loss arising from the trading of contracts at the Wholesale Electricity Spot Market.

ERC issued Resolution No. 16 series of 2016 stating that it would adopt the 2008 policy in the monthly computation of generation rates of distribution utilities.

ERC said the move aimed to protect the interest of consumers from profiteering or advantages gained by distribution companies at the WESM, the country’s trading floor of electricity.

The regulator said it resolved to adopt the policy stated in the letter-reply to National Power Corp. dated Oct. 20, 2008, in the monthly computation of generation rates.

ERC said the 2008 rules stated that “where all the gains that the DUs obtain from selling to the WESM, as well as the excess kWh sold back to the WESM, shall be reflected as reduction from the WESM generation cost and kWh purchased.”

It said “the losses incurred both in monetary and excess kWh sold back to the WESM due to the trading of contracts [should] all be borne by the DUs as a result of the participation in the electricity market trading.”

The formula for the generation cost was determined by summing up the cost of power from all suppliers, WESM purchases, DU-owned generation facility less the generation revenue from time of use customers, cost of power distributed to customers under a sale for resale agreement, if the customers being supplied are not connected with the main distribution grid and the cost is different from those of other regular customers.

Former National Power Corp. president Cyril del Callar raised an issue in 2008 on the payments and reimbursements made by the Philippine Electricity Market Corp., operator of the WESM, to distribution utilities to nominate higher bilateral contract quantities as compared to their actual consumptions.

Napocor was forced to buy back such excess nominations of the distribution utilities that were WESM direct members to serve their customers.

The state-owned power firm claimed that the practice of excess nomination of BCQs by WESM direct members would ultimately impact on the non-WESM direct member-customers of Napocor by way of subsidization so they could resort in gaining in the market for additional profit  to the detriment of Napocor and customers.

ERC responded to Napocor stating that “whatever gains the DUs obtain from selling to the WESM is passed on to the end users through the automatic generation rate adjustment.”

“As a regulator, it is the commission’s mission to protect and promote long-term consumer interests. The commission will ensure that losses due to the trading of the contracts to the WESM cannot be passed on to consumers,” ERC said in a letter to former Napocor president Froilan Tampinco.