WESM’s secondary price threshold raised to P9/kwh

by Myrna Velasco, December 26, 2014
from Manila Bulletin

The permanent price threshold for the secondary cap of the Wholesale Electricity Spot Market (WESM) has been adjusted upwards to P9.00 per kilowatt-hour (kwh) from previously at P8.186 per kwh.

It was emphasized though that the price cap was maintained at P6.245 per kilowatt-hour (kwh), since it will be the price threshold and the rolling average in prescribed trading intervals that will matter a great deal in the imposition of the second layer of spot market price cap.

wesm logoIn the Resolution issued by the Energy Regulatory Commission (ERC) last December 23, the trading interval in which the price threshold must be breached has also been prolonged to seven (7) days or 168-hour trading intervals from just three (3) days or 72 hours in the last regulatory prescription.

With the lengthened trading duration and a higher price offer reference, the ERC noted that the permanent mitigating measure for the electricity spot market now leans on a price threshold of 1,512,028 per megawatt hour.

“A cumulative price threshold (CPT) amounting to P1,512,028.00  equivalent to the generator weighted average prices (GWAP) over a rolling 7-day period  or 168-hour trading interval, is hereby set in the WESM,” the ERC resolution has stipulated.

It further explained that such will be “equivalent to an average spot price of P9,000/MWh over the period.”

The ERC has averred that “a breach of the CPT for the said period triggers the imposition of a price cap amounting to P6.245/MWh.”

It expounded that “the market clearing price for the immediate trading interval  following the breach will be pegged at the value of the price cap and shall be imposed until after a determination that the succeeding GWAP rolling average is already below the CPT.”

The regulatory body has qualified though that “during the period where the price cap is imposed, if there are intervals where the market clearing price is lower than the price cap, the market clearing price will be applied for settlement purposes.”

The imposition of a secondary cap in the power spot market had been one of the regulatory body’s calculated approaches onto protecting consumers from sudden price spikes.

It was among the regulatory levers and policy frameworks thought out when consumer agitation ensued following drastic spikes in November-December 2013 rates due to supply tightness dilemmas.

The power industry players are not exactly opposed to a second WESM price cap, but they batted for a higher level that will allow them to viably recover their investments and operating costs.


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