THE Energy Regulatory Commission (ERC) is putting in place a P9-per- kilowatt-hour (kWh) permanent limit over a seven-day period at the Wholesale Electricity Spot Market (WESM) to protect consumers from unreasonable price increases in the spot market.
A resolution formalizing this so-called permanent mitigating measure will be signed within the week. The ERC, according to Executive Director Saturnino Juan, is looking at implementing this within the first or second week of January 2015 after publication next week.
“The commission just arrived at the figures and it’s just a matter of signing the resolution before we implement it. This is going to be implemented permanently until we decide to lift it,” Juan said.
ERC officials discussed the new threshold before a Senate hearing on Tuesday.
“The threshold is going to be at P9 during peak period over seven-days,” ERC Commissioner Josefina Patricia Asirit said.
A P6.245-per-kWh secondary price cap will immediately take effect once the P9- per-kWh threshold has been breached.
Aside from the secondary price cap, the ERC had also put in place a primary bid cap of P62 per kWh. This was later reduced to P32-per-kWh in December of 2013 due to the unreasonable higher market prices during the Malampaya shutdown in November and December of last year. The P32-per-kWh primary cap remains in effect.
The secondary price cap used to be implemented once an average price of P8.186 per-kWh is hit over a 72-hour period until the implementation of which lapsed on December 8.
The ERC has decided to amend this, putting in place the same secondary price cap but will only kick in when the P9-per- kWh threshold has been breached during a three-hour peak period over seven days.
“To arrive at the P9 threshold, we simulated the different price for the off-peak and peak periods. We assumed that in a day, there’s a peak that will last for three hours and assumed further that during this period the marginal plants will be the peaking plants and they will recover their costs at the maximum of P32 per kWh,” Juan said.
The price cap, Juan said, is the highest electricity price offered by a seller at the WESM. Trading happens as soon as suppliers submit bids to the market operator. These bids are then ranked from cheapest to the most expensive. The highest priced offer that is accepted becomes the spot market’s price for the hour.
Power suppliers said the price cap is disadvantageous and are asking the ERC to reconsider this.
“Maybe what the ERC can do is to lower the primary cap to P18 or P22 instead of P32 rather than put a secondary cap to reflect the true price at WESM,” said Ernesto Pantango, chairman of Management Association of the Philippines Committee on Energy.
Power suppliers had said the secondary price cap should be applicable only to the base-load and mid-merit plants but not for peaking plants, which generally run when there is high demand.
Peaking plants operate only during the times of peak demand, while base- load plants operate at maximum output. Base-load plants usually run on coal and fuel oil, while peaking plants include hydro and gas turbine which can be fueled with natural gas or diesel.