ERC nixes lifting of WESM secondary price cap

The Energy Regulatory Commission (ERC) will not lift the secondary price cap imposed on the country’s trading floor for electricity despite calls by the Management Association of the Philippines (MAP), a ranking official said yesterday.

ERC executive director Saturnino Juan said the commission would only lift the secondary cap if a more permanent solution becomes available.

“The ERC has already decided that the secondary cap will remain until a permanent mitigating measure is put in place. It sees the continuing need for this measure to prevent market power abuse and other anti-competitive practices, which affect prices in the WESM (Wholesale Electricity Spot Market) to the detriment of the consumers,” Juan said.

WESM is the country’s trading floor for electricity. In May, the ERC imposed a secondary price ceiling at the spot market to cushion consumers from possible power rate hikes.

The ERC imposed the secondary price cap of P6.245 per kilowatt-hour effective until the end of the year or until a permanent mitigating measure is put in place.

The price cap is the highest offer that sellers can give when they sell their electricity to the market. Power suppliers with the lowest price get to supply the requirements of distribution utilities but the last offer is the one that sets the price for which they will be paid.

Power generators have opposed the price cap, saying it would be detrimental to their business.

MAP on Thursday also added its voice to those opposing the secondary price cap.

“We encourage the Energy Regulatory Commission to lift the secondary price cap in the Wholesale Electricity Spot Market as this deters the entry of new and existing peaking plants by effectively disallowing them from recovering fuel costs,” the MAP said in a position paper on the energy situation.

The ERC, for its part downplayed such concerns.

“It is convinced that even with the secondary cap, the peaking plants will be able to recover their full allowable costs,” Juan said.

The ERC imposed the price cap after prices at the WESM skyrocketed last year, resulting in a record high generation charge of P9.10 per kilowatt-hour in December 2013.