WESM price cap at P32/kWh is permanent–tripartite panel

by Lenie Lectura – January 11, 2016

from Business Mirror

The Wholesale Electricity Spot Market (WESM) tripartite committee has made permanent the P32-per-kilowatt-hour (kWh) price ceiling on power traded at the spot market to continue to shield consumers from any sudden price spike down the line.

“In the tripartite meeting of the ERC [Energy Regulatory Commission], DOE[Department of Energy] and PEMC [Philippine Electricity Market Corp.], we resolved to peg the ceiling at P32. We issued a resolution on this last December,” ERC Chairman Jose Vicente B. Salazar said in a text message on Sunday.

PEMC President Melinda L. Ocampo said, separately, “there will be a continuing effort” to review the price cap. “It’s already permanent, but there is a colatilla that there will be a review, depending on the situation,” she said the
previous Friday.

The original WESM ceiling price of P62 per kWh was reduced to only P32 in December 2013, following record- high-prices recorded by the Manila Electric Co. (Meralco).

Since then, the implementation of the P32-per-kWh price cap was
extended five times.

A secondary price cap of P6.245 per kWh is also being implemented as a price mitigating measure so consumers are protected from steep WESM prices when supply is tight in the spot market.

Both price caps have already been made permanent, Salazar said.

The secondary price cap is imposed once an average threshold of P9 per kWh threshold is reached over a 168-hour period.

The caps were computed based on historical prices, with allowance for three intervals hitting high-market clearing prices.

Ocampo said a review of the price caps would be conducted “if they are no longer sufficient.”

“Since the primary price cap could not fully capture incidents of sustained clearing of high spot prices, a secondary price cap mechanism was put in place by the ERC as a preemptive measure to help limit recurring occasions of high prices in the WESM,” PEMC said.

“The PEMC is resolved to fully realize the objectives of the Epira in promoting transparency in electricity pricing and provide a level playing field to all electric power industry participants.

“With the robust enforcement and compliance framework present in the spot market, we assure everyone that competition thrives in the market where all players are encouraged to abide with the WESM rules,” Ocampo said.