The aggrupation of generation companies (GenCos) has been batting for the scrapping of the P6.245 per kilowatt hour (kWh) secondary price cap in the Wholesale Electricity Spot Market (WESM) as this is already pinned down as disincentive to the targeted fresh capital flow in the power industry.

In an interview, Philippine Independent Power Producers Association Inc. (PIPPA) President and Executive Director Anne Montelibano noted that the plea of the power firms will be to remove the secondary price cap (SPC); while the primary offer cap of P32 per kWh can still be retained.

She expounded that if the Energy Regulatory Commission (ERC) would not be amenable to the SPC ditch, then the option is to adjust the cap higher so it can be in tune with the needs of investors for prudent cost recoveries as anchored on development-changes in the industry.

“We want it (SPC) scrapped. But if our business climate for that is not ready, then amend; and it should be revisited every quarter. That amendment should consider the indices and the prices of fuel being used for power generation,” Montelibano stressed.

Power industry players previously hinted that the SPC increase they have been pitching for would be P10 to P15 per kWh – but that was first raised at the height of spikes of fuel prices in the world market since 2022 to 2023.

The current trigger or price threshold before the SPC can be enforced in the spot market is at P9.00 per kWh, reckoned as generator weighted average price (GWAP) within trading periods stretching 3 days or 864.5-minute intervals.

Montelibano indicated that the amended secondary price cap “must capture realities in the market…so it has to go up, because the current SPC is already antiquated.”

She further conveyed that the power producers already explained to the ERC during public consultations, that “there is a need to look into the experience of other jurisdictions, for example in Australia, they recognize the need of the generators to recover.”

Montelibano emphasized “for grid stability and energy security, we need these generators to run and they must also be incentivized with their operations – so the costs have to be adjusted, and fuel costs are really rising in the world market… what we’re saying is: if other jurisdictions recognize that their generators need to recover, we also need that kind of  balancing act in our market.”

When asked on the impact of a higher secondary price cap in the bills of consumers, she stated that the servicing distribution utilities (DUs), like Manila Electric Company (Meralco), can shield themselves from high exposure in the spot market by sufficiently covering their supply portfolios with contracts or power supply agreements.

“If you’re a DU, you must be adequately contracted to lessen your exposure in the market. That’s what we clarified during the public consultations, because it’s just the volumes procured from the spot market that will be affected,” she said.

Montelibano added “if you have adequate or sufficient supply contracts, these can mitigate the risk in the market, so technically, it (higher price cap) would not have any impact.”