Higher secondary cap for WESM sorted out

The tripartite committee, with the Energy Regulatory Commission (ERC) taking the lead, will flesh out the issues relating to the plea of many power investors for probable upward adjustment in the current secondary cap imposed upon traders at the Wholesale Electricity Spot Market (WESU).

ERC chairman Jose Vicente B. Salazar has acknowledged that there is a standing proposal by a foreign consultant which is still up for evaluation of the tripartite committee – a body that also include the Department of Energy and WESM operator Philippine Electricity Market Corporation (PEMC).

“We will determine the way forward as a tripartite group on these issues in as much as the price cap and the secondary mitigating measures were arrived at after a consensus,” he stressed.

The spot market’s prevailing primary cap is at 32 per kilowatt hour (kWh); while the secondary cap was set at 6.245 per kWh – to be reckoned on price outcome breach of the set price threshold of 9.00 per kWh over a fiveday trading interval.

The price caps were recently extended until the time that the tripartite body could come up with a more acceptable and industry-feasible price levels of mitigating measures that could keep both the industry players and the cost-volatile spot market stay afloat.

PEMC president Melinda L. Ocampo divulged that so far, the suggestion of foreign consultant Power Wrangler will be for an upward adjustment of the secondary cap.

But this can only be considered after the ERC would have undertaken a ‘net revenue analysis’ of the costs being incurred by participant-power generators in their trading of capacity in the spot market.

“The secondary cap is a matter to be handled by the ERC…we do not know if they can establish the net revenue analysis (NRA) as recommended by the foreign consultant,” she said. Ocampo added that on PEMC’s part, they have already sounded off that “we cannot do the NRA because we do not know their (generators’) production costs – so we are not sure what would be the basis.”

She further indicated that the tenor of the foreign consultant’s recommendation is “if the review of the secondary cap is pursued…it is not for it to be reduced further anymore, but it must be adjusted upwards.”

PEMC vice president for corporate planning and communications Robinson Descanzo added that adjustments in the costs are warranted, primarily factoring in the generators’ fuel costs as well as the changes in other cost variables, such as foreign exchange adjustments.