ERC backpedals on WESM secondary cap’s reduction

Published February 14, 2020, 12:00 AM

by manilabulletin_admin


The Energy Regulatory Commission (ERC) is backpedaling on proposals to lower the secondary cap of traded capacity in the Wholesale Electricity Spot Market (WESM), which should have been to the level of ₱4.502 per kilowatt-hour (kwh) from currently at ₱6.245 per kwh.

ERC Chairperson Agnes T. Devanadera sounded off that the reduction in the spot market secondary cap is not exactly a priority, because they would also need to gauge the impact of such on investment appetite amid threats of supply shortages hitting during the summer months.

“There’s still an existing secondary cap and it has helped control prices,” the ERC chief said, noting that this could still mitigate price spikes during the peak demand months of March to June.

In a draft resolution of the ERC, it was propounded that the cumulative price threshold shall also be trimmed to ₱6.919 per kwh over a rolling three-day or 72-hour trading intervals. That was somehow reduced from a CPT of ₱9.00 per kWh for a longer trading duration of five (5) days or 120 hours.

Devanadera indicated that if the power supply-demand outlook of the country is on a highly favorable terrain, there might even no need anymore for a secondary price cap in the WESM.

Unfortunately though, she noted that given the tight supply condition primarily in the Luzon grid, there is still a critical need for the regulatory enforcement of a secondary cap in the spot market.

“In normal times, we even saw a study that the secondary cap in other jurisdictions is no longer being implemented and they let the market forces play. But for now, it (secondary cap) has a role to play,” Devanadera stressed.

The ERC chairperson emphasized that they would also need to seriously consider the concern of the generation companies (GenCos), as any economically unviable price cap that must be imposed could stifle investment flows for additional power capacities.

“If there’s enough supply or if you have as many as 500 GenCos, you may no longer need a secondary cap,” Devanadera has reiterated.

On the proposed lowering of the secondary caps – including those being cast across grids, she emphasized that the Commission “has not arrived at a conclusion – but what is important is there’s one that is existing and in place.”

She similarly explained that the original intention was actually just to review the WESM secondary cap, “it didn’t necessarily say, we lower it down. So if you review, it may even go higher.”

In the Commission’s draft resolution, it likewise propounded segregated secondary price caps across grids; prescribed at ₱5.249 per kwh for Luzon grid; ₱2.837 per kWh for Visayas grid; and ₱3.074 per kwh for Mindanao grid.