ERC reduces secondary caps

Published January 26, 2020, 12:00 AM

by manilabulletin_admin


With forecasts of tight supply conditions on this year’s summer months, the Energy Regulatory Commission (ERC) is instituting a regulation that will reduce the secondary price caps in the Wholesale Electricity Spot Market (WESM) to moderate if not totally prevent spikes on power rates.

From the existing secondary price cap of ₱6.245 per kilowatt-hour (kWh), the ERC is proposing that this be trimmed down to ₱4.502 per kWh based on a recalculated ₱6.919 per kWh generator weighted average prices (GWAP) over a rolling three-day or 72-hour trading interval in the spot market.

The trading interval has likewise been shortened from previously at five days or 120 hours and from a GWAP or average spot price of ₱9 per kWh.

The ERC has also recommended regional price caps to be administered as follows: ₱5.249 per kWh in the Luzon grid; ₱2.837 per kWh for the Visayas grid; and ₱3.074 per kWh for Mindanao grid.

The propounded cuts in spot market secondary price caps is still undergoing public consultations, but the generation companies (GenCos) are already interposing objections to the proposal because the recommended rates are way lower than what could be considered as viable cost recoveries for them.

The secondary cap serves as the next layer of pricing control or mitigation in the electricity spot market, subsequent to the prevailing primary price cap of ₱32 per kWh that trading participants would need to adhere to when making offers in the market.

For the new secondary price caps to be enforced by the WESM operator, the ERC draft rules stipulated that the cumulative price threshold (CPT) that must be breached for the Luzon grid will be at ₱8.330 per kWh on a prescribed successive three-day trading or a period of 72 hours.

For the Visayas grid, the calculated CPT is at ₱6.038 per kWh and Mindanao grid at ₱6.550 per kWh. The duration of trading for the secondary cap to be activated in these markets is similar to the prescription for Luzon grid.