GenCos plan hike in WESM secondary cap

Aspike in the secondary price cap for the Wholesale Electricity Spot Market (WESM) to the tune of ₱10,000 to ₱15,000 per megawatt hour (MWh) - or equivalent ₱10-₱15 per kilowatt hour) - has been proposed by the generation companies (GenCos) to the Energy Regulatory Commission (ERC), according to the Philippine Independent Power Producers Association Inc.

Essentially, that will be an increase from currently at ₱6,245 per MWh or equivalent ₱6.245 per kWh within the ₱9,000 per MWh threshold on a rolling 72-hour trading interval that had been set by the regulatory body.

As noted by PIPPA, the higher WESM secondary cap proposed is aimed at correcting the price distortion in the signals exhibited through the trading of capacities in the spot market.

If the price cap will be elevated, the aggrupation of the power generation companies indicated that investments for new capacities will come in and that will help in easing the country’s recurring predicament over power supply shortages.

PIPPA President Anne Estorco-Montelibano asserted that the higher SPC will be anchored on triggering factors – and the price threshold shall also be revised corresponding to the targeted increase in the price cap.

“We submitted our position paper to the ERC, and then we’re exploring several triggers because the Chair (Monalisa Dimalanta) is still requiring us to fine-tune; and there are jurisdictions that we’re looking at also, like let’s say if there’s a double trigger,” she said.

Despite the usual reporting of GenCos that the escalation on their profits had been partly due to higher WESM prices, PIPPA argued that there are still lag or ‘distortion’ on their recovery of load losses.

For the consumers though, the apparent outcome of such increase in the WESM secondary price cap will be higher electric bills – especially if the servicing distribution utilities (DUs) will have high exposure in the spot market.

Relative to the PIPPA proposal, Dimalanta highlighted that in the regulator’s initial discussion with the GenCos, the ₱10,000 to ₱15,000 per MWh secondary price cap “doesn’t seem right…so we said, can we both go back to work and see if we can do better, if we can find a better test.”

She added the ERC will need to review the corresponding effect of the SPC to the new capacities that came in, “so I think, all these things have to be reviewed and considered when we revisit the SPC as a framework, as a mechanism, not just the price.”