Gov’t lowers price cap in power market

MANILA, Philippines - The price cap at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity, will be decreased to P32 from the current P62, as proposed by Energy Secretary Carlos Jericho Petilla to shield consumers from price volatility.

Petilla said a tripartite committee composed of the Department of Energy, the Energy Regulatory Commission (ERC), and the Philippine Electricity Market Corp. (PEMC) has agreed to a new P32 price cap.

However, the ERC has yet to issue a resolution lowering the price cap. Although prices at the WESM are market driven, the cap sets the price limit at the WESM even if electricity prices shoot up due to scarcity of electricity.

“We will put a cap of P32 from P62. We will also provision on force majeure on the rules…For now we have to put these in place so there will be no spike (in prices),” Petilla said.

Efforts to improve operations at the WESM to avoid spikes in prices stemmed from the record increase in generation charge of Manila Electric Co. (Meralco), the country’s biggest power distributor, of P3.44 per kilowatt-hour in December.

This, in turn, stemmed from the one-month maintenance shutdown of the Malampaya gas field which supplies natural gas to three power plants in Luzon and from high prices at the WESM where Meralco also sourced part of its power requirements.

Meralco officials attributed the high prices at the trading floor to tight supply because of emergency shutdowns of power plants.

The DOE, ERC and PEMC are now looking at the alleged collusion among power plant operators and expect to come up with preliminary results by Dec. 30.

The three plants sourcing power from Malampaya are the 1,200-MW Ilijan combined cycle natural gas plant owned by Kepco Philippines Corp. and the 1,000-MW Sta. Rita and 500-MW San Lorenzo natural gas facilities owned by First Gen Corp. of the Lopez Group.