ERC to gencos on regulated WESM prices: Comply or face suspension

MANILA, Philippines – Power generation companies (gencos) were given by the Energy Regulatory Commission (ERC) 45 days more to comply with its order imposing regulated WESM (Wholesale Electricity Spot Market) prices for the November and December supply months.

“In view of the pendency of the various submissions before the Commission and mindful of the complexities in the implementation of the Commission’s order dated March 3, the Commission is constrained to direct PEMC (Philippine Electricity Market Corporation) to provide the market participants an additional period of 45 days from receipt hereof to comply with the settlement of their respective WESM bills,” said ERC in a 10-page order.

The latest ERC order dated March 27 but was made public on April 2 warned gencos that they would be charged interest and get suspended if they failed to refund overcharges under the adjusted WESM bills given out by PEMC.

The order followed separate motions filed by gencos SN Aboitiz Power-Magat Inc., SN Aboitiz Power-Benguet, San Miguel Energy Corporation (SMEC), South Premiere Corporation (SPC), Strategic Power Development Corporation (SPDC), SMC Powergen Inc., Therma Mobile Inc. (TMO), Therma Luzon Inc. (TLI) and AP Renewables Inc., which argued that the March 3 order of ERC “prematurely concluded” that gencos committed anti-competitive behavior, market abuse and violation of WESM rules.

The ERC ruling stated that prices in the spot market during November and December “could not qualify as reasonable, rational and competitive due to a confluence of factors.” As such, it voided the prices and ordered the imposition of regulated prices that supposedly took effect last March 28.

TMO and TLI, both owned by Aboitiz Power Corporation, said they were fully compliant with WESM rules, requirements and procedures. “TLI opposes the declaration in the March 3 order that the generation sector caused deliberate market failure.”

TLI stressed that the ERC findings were “premature and erroneous,” so it asked that it be allowed to intervene in the case. “TLI would like to have the opportunity to be apprised of and fully consider all the issues involved, examine the evidence presented by the parties, and present its arguments and evidence.”

Neither TLI nor TMO withheld their capacities, they said. “TLI supports alleviating the burden on consumers caused by the high WESM spot market prices during the November and December 2013 supply months as TLI also suffered losses during the same period. It is, however, respectfully submitted that the same must be done in a legal and fair manner in accordance with due process and with statutory or regulated basis,” added TLI.

SMEC, SPC, SPDC said they would suffer liquidity impairment if the March 3 order was implemented. They added the order was effectively requiring them to sell their respective capacities at a loss.

VMC Rural Electric Cooperative, Cabanatuan Electric Cooperative, 1590 Energy Corporation and Aboitiz Power asked for the deferment of the order.

On March 18, PEMC, complying with the ERC order, cut WESM average prices for the supply months of November and December by over 70% and sent out revised bills to WESM buyers, including the Manila Electric Company (Meralco).

Meralco was only given a revised bill for the month of December, however, because the November month was subject of a pending case before the Supreme Court.

Meralco said the huge decline in its December WESM bill also resulted in a significant cut in the generation charge hike it was seeking for the month of January. (READ: What Meralco’s rate hike tells us about the power sector) – Rappler.com