ERC sets rules on WESM-traded capacity

by Myrna Velasco – July 10, 2016

from Manila Bulletin

The Energy Regulatory Commission (ERC) has laid down specific rules on how cost computation shall be applied on capacities being traded via the Wholesale Electricity Spot Market (WESM) that go beyond the bilateral contract quantities (BCQs) of distribution utilities (DUs) with state-run National Power Corporation and other suppliers.

The ERC, under Resolution No. 16 Series of 2016, has enforced that the gains the DUs obtain from selling to the WESM beyond their contract capacities, as well as the excess kilowatt hours (kWh) sold back to the spot market, “shall be reflected as deduction from the WESM generation cost and kWh purchased.”

In the same vein, the regulatory body has ruled that “the losses incurred both in monetary and the corresponding excess kWh sold back to the WESM due to trading of contracts shall be borne by the DUs as a result of the participation in electricity market trading.”

The concern on probable subsidization of costs was raised by state-run NPC way back in 2008, generally on the WESM trading of capacities then beyond its BCQs with DUs, including that of the Manila Electric Company.

The case was revived and finally ruled upon by the ERC in the latest resolution that it issued for the industry’s compliance.

This particular concern was on account then of “the issues of payment and reimbursements made by Philippine Electricity Market Corporation (PEMC) to distribution utilities that nominate higher BCQs as compared to their actual consumptions.”

NPC noted that it was being “forced to buy back such excess nominations of these DUs that are WESM direct members, to serve its other customers.”

NPC has stipulated that “the practice of excessive nomination of BCQs by WESM direct members will ultimately impact on non-WESM direct customers of NPC by way of subsidization.”