Consumer group wants WESM probed for power price spikes

MANILA, Philippines - A consumer advocate has urged Malacañang and the Energy Regulatory Commission (ERC) to investigate the huge price spikes at the country’s wholesale electricity spot market (WESM).

In a statement, the Center of Organizational Studies and Advocacy (COSA) said there is also a need to look into the role of generating companies in the continuing rise in power rates.

“The WESM was supposed to encourage competition among the power producers with the view of bringing down prices for the benefit of the end-users. Ironically, it seems to be going in the opposite direction,” COSA chief advocate Rafael de la Torre.

He pointed out that WESM has a strange price-setting mechanism. Instead of choosing the lowest price offered, WESM adopts the highest price as the “clearing price” for all the bidders.

Philippine Electricity Market Corp. (PEMC), operator of WESM, earlier admitted that after over a year of Effective Settlement Prices (ESP) ranging from P1.25 per kwh to P4.55 per kwh, the WESM preliminary prices for the period covering Feb. 26 to March 25, 2010 jumped significantly to an ESP of P12.96 per kwh which was higher than the previous month’s P11.29 per kwh.

Based on WESM preliminary settlement data, about 22 percent of total market transactions for the March billing period were actual purchases from the market, while about 78 percent were reported to have been sourced from bilateral power supply contracts, which were settled outside the WESM. 

“Bilateral power supply contract transactions are not affected by the prices at the WESM. For the March settlements, the prices in the WESM only affected about 22 percent of the total energy consumption for Luzon ,” PEMC executive vice president Mario R. Pangilinan said.

Pangilinan noted that occurring during the month are the scheduled outages of natural gas-fired plants such as the Ilijan, Sta. Rita and San Lorenzo power plants, as well as the low output from hydroelectric power plants brought about by the El Niño Phenomenon.

COSA also took the generating companies to task for their involvement in these power rate increases.

Dela Torre said since the WESM was created by law, “it is just fitting that Congress should take a closer look at how it is fulfilling its mandate, which is to lower power rates.”

Created under Republic Act 9136 also known as the Electric Power Industry Reform Act (EPIRA), the WESM serves both as a venue and a clearing house for trading electricity as a commodity.

Authorities must also ask power generating companies to explain the unabated power rate increases. These firms are either under the umbrella of the National Power Corp. (Napocor) or are themselves the independent power producers (IPPs).          

“The price fixing practice of this WESM is unconscionable – because it is patently anti-consumer: WESM chooses the highest bid price (instead of the lowest) offered by participating plants in a bidding process,” Dela Torre said. Quoting industry sources, he described how WESM arrives at clearing prices.