P32/kWh price ceiling on power trade permanent – WESM

MANILA, Philippines – Energy regulators have made the P32 per kilowatt-hour (kWh) price ceiling on power traded at the spot market permanent to continuously shield consumers from sudden price spikes.

The Wholesale Electricity Spot Market (WESM) tripartite committee, which includes the Energy Regulatory Commission (ERC), the Department of Energy (DOE), and the Philippine Electricity Market Corporation (PEMC), decided to retain the P32 price ceiling – a far cry from the original P62 per kilowatt-hour.

WESM was created following the restructuring of the energy sector under the Electric Power Industry Reform Act (EPIRA) of 2001, with the objective of bringing power costs down in Luzon and Visayas regions by providing a centralized venue for buying and selling electricity.

Prices at WESM are determined by supply and demand. When supply becomes tight and demand goes up, prices rise. The PEMC facilitates the trading at WESM. (READ: INFOGRAPHIC: How WESM affects your electricity bill)

The original WESM ceiling price of P62 per kilowatt-hour was reduced to P32 in December 2013, following the record-high prices recorded by the Manila Electric Company (Meralco). Since then the implementation of the P32 WESM price cap has been extended 5 times.

“In the tripartite meeting of ERC, DOE, and PEMC, we resolved to peg the ceiling at P32. We issued a resolution on this last December,” said ERC Chairman Jose Vicente Salazar.

While this is set permanently, PEMC President Melinda Ocampo said they would continuously review the price cap.

“It’s already permanent, but there is a colatilla that there will be a review, depending on the situation,” Ocampo said.

Secondary price cap

The committee also set another permanent price cap in an attempt to further protect consumers from steep WESM prices when supply is tight in the spot market.

This secondary price cap, which is pegged at P6.245 per kilowatt-hour, will take effect once an average threshold of P9 per kilowatt-hour is reached over a 168-hour period.

The committee said both price caps were computed based on historical price.

“Since the primary price cap could not fully capture incidents of sustained clearing of high spot prices, a secondary price cap mechanism was put in place by the ERC as a pre-emptive measure to help limit recurring occasions of high prices in the WESM,” said PEMC.

“With the robust enforcement and compliance framework present in the spot market, we assure everyone that competition thrives in the market where all players are encouraged to abide with the WESM rules,” said Ocampo. – Rappler.com