DOE allows market intervention in WESM

MANILA, Philippines - The Department of Energy (DOE) is allowing market intervention in the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity, to temper unusual price spikes as what happened in November last year.

“In a nutshell, there is now market intervention,” Energy Secretary Carlos Jericho Petilla said when sought for comment on the new circular.

Based on Department Circular 2014-01-0001, the Philippine Electricity Market Corp. (PEMC), the WESM operator, has the option to intervene in the market by setting an administered price gauged on the average price in the last 30 days prior to the day of intervention.

It said PEMC may intervene when there is a supply emergency “where electricity supply capacity shortfall, is measured at four percent or below the total demand.”

“Provided further that the four percent trigger shall continue to be applied until the DOE determines, through the National Transmission Corp., the National Grid Corp. of the Philippines and the Grid Management Committee, that a new trigger is applicable,” Petilla said in the circular.

He stressed that market intervention is merely an option that may or may not be exercised by PEMC as market operator.

“[I]n light of recent events, the DOE saw the need to provide for an interim measure for the market operator and/or system operator’s declaration of market intervention in order to ensure utmost consumer protection specially in times of critical situation of the supply of electricity power that triggers high prices in the WESM,” Petilla said in the circular.

He also said the administered price cap approved by the Energy Regulatory Commission (ERC), the power regulator, shall continue to be used for settlements in the trading intervals where market interventions were declared, until such time that the PEMC has recommended a new formula for approval of the ERC.

The issuance of the circular comes after the electricity spot market experienced tight supply as a result of unplanned power outages by some power plant operators, leading to a spike in prices. This, in turn, contributed to the record increase in the December 2013 generation charge of Manila Electric Co. (Meralco) of P3.44 per kilowatt-hour.

Due to tight supply at the spot market, the price of electricity for Luzon in the spot market rose to P15.51 per kwh from P6.16 per kwh in October. This was reflected in the December 2013 bills. 

The Supreme Court has issued a 60-day temporary restraining order (TRO) on Meralco’s December rate hike and has set oral arguments on the petition on Jan. 21.