WESM price caps made permanent

by Myrna Velasco – January 10, 2016

from Manila Bulletin

The primary and secondary price caps of the Wholesale Electricity Spot Market (WESM) have been made permanent, based on the latest decision of the government-led tripartite committee.

“It was already made permanent but subject to constant review,” Philippine Electricity Market Corporation (PEMC) president Melinda L. Ocampo has noted.

The primary price cap has been maintained at P32 per kilowatt hour; while the secondary cap was retained at P6.245 per kwh and still referenced on the price threshold of P9.00 per kwh over 7 days or 168 hours of trading intervals.

Ocampo said the decision was arrived at the last meeting of the tripartite body – the PEMC, Department of Energy (DOE) and the Energy Regulatory Commission (ERC). PEMC is the operator of the electricity spot market.

The secondary cap was imposed following the price spikes of November-December, 2013 to temper cost impact on consumers.

In the past two years, the price caps worked in mitigating wild gyrations of WESM prices, especially during the feared tight supply in the summer months.

The primary cap reduction was also triggered by the 2013 ‘perfect storm scenarios’ in the power industry. The new cap had been cut from P62 per kwh.

Nevertheless, power producers, primarily those supplying the peaking needs of the electricity system, have also been batting for cost recovery commensurate to their expenses, generally for fuel procurement.

Ocampo previously indicated to media that the secondary cap may be jacked up based on the net revenue analysis propounded by PEMC’s foreign consultant.

She stressed then that there had been no other way but for the secondary cap to be adjusted upwards, but the tripartite body may have seen some basis to decide otherwise.