ERC extends implementation of secondary price ceiling

MANILA, Philippines - The Energy Regulatory Commission (ERC) has extended anew the implementation of a secondary price ceiling in the electricity spot market to cushion consumers from possible power rate hikes.

In an Aug. 5 resolution, the power regulator extended the measure for 120 days starting Aug. 10 or until a more permanent solution is put in place.

 “It is hereby resolved: to extend the effectivity of the secondary cap mechanism for 120 days from August 10 or until the establishment by the ERC of a permanent pre-emptive mitigating measure in the WESM, whichever comes earlier,” the ERC said.

WESM is the Wholesale Electricity Spot Market or the country’s trading floor for electricity.

In May, the ERC imposed a price cap of P6.245 per kilowatt-hour (kwh) until June 26 but extended this to Aug. 9

The price cap is the highest offer that sellers can give when they sell their electricity to the market. Power suppliers with the lowest price get to supply the requirements of distribution utilities but the last offer is the one that sets the price for which they will be paid.

The ERC said it had to extend the secondary price cap because it still needs to evaluate the alternative mechanisms proposed by generation companies.

 “The alternative mechanisms submitted by the stakeholders necessitate further study to complete the process of finally establishing a permanent measure which could be applied in the WESM and thus the ERC found the need to extend the implementation of the current secondary cap mechanism,” it said.

The interim measure was put in place to mitigate sustained high prices in the WESM during the May and June supply months.

The ERC said it would adopt a permanent pre-emptive mitigating measure that would be applied in the WESM.

Data from the commission showed that power supply in the Luzon grid will remain tight from June to December  due to the maintenance shutdowns of several power plants.

“The Power Supply-Demand Outlook of the Luzon Grid for the period June to December 2014 submitted by the Department of Energy (DOE) disclosed that there is insufficient available capacity for contingency and dispatchable reserve requirements from June up to September 2014,” the ERC said.

It said that the required capacities for contingency and dispatchable reserves are expected to become available in the last quarter. This hinges on the commitments by power generators of 315 MW of total installed capacity by that time.

The ERC said the El Nino weather disturbance would also affect power supply as this affects hydro power plants’ capacity.

According to data from the National Grid Corp. of the Philippines submitted to power regulators nine power plants are scheduled to go offline between February and December.

These include Pagbilao 2 (382 MW), Sta. Rita Module 20, (250 MW), Sual 1 (647 MW), Sual 2 (647 MW), Sta. Rita Module 40 (250 MW), San Lorenzo Module 50 (250 MW), Sta. Rita Module 30 (250 MW), San Lorenzo Module 60 (250 MW) and Malaya 2 (350 MW).