Why ERC extended WESM price cap

By Alvin Elchico, ABS-CBN News

Posted at Jun 24 2014 04:26 PM | Updated as of Jun 25 2014 12:26 AM

MANILA, Philippines – The Energy Regulatory Commission (ERC) has extended by 45 days the secondary cap on the prices of electricity traded at the Wholesale Electricity Spot Market (WESM).

The cap of P6.245 per kilowatt hour is only valid until June 25 but with the 45-day extension, it will be implemented until August 8, 2014.

The commission feels that electricity supply is going to be tight in the coming weeks as several plants have to undergo maintenance shutdown.

Expected to go on preventive maintenance shutdown are the following plants:

375 megawatt (MW) Unit 1 of Pagbilao plant from June 10 to July 9
382 Unit 2 of Pagbilao plant from July 16 to August 14
250 MW module 2 of Sta. Rita plant from September 6 to September 20
647 MW Unit 1 of Sual power plant from September 12 to October 11
647 MW Unit 2 of Sual power plant from August 16 to September 14
250 MW module 40 of Sta. Rita plant from February 28 to December 31
250 MW module 50 of San Lorenzo plant from October 25 to October 29
250 MW module 50 of Sta. Rita plant from November 1 to November 5
250 MW module 60 of San Lorenzo plant from November 8 to November 12
350 MW Unit 2 of Malaya power plant from November 8 to December 23

These do not include emergency or unscheduled shutdowns like the units of Sual and Malampaya natural gas facility last week.

According to ERC executive director Atty. Francis Juan, the secondary cap will be good for the consumers since it can shield them from spikes in the market price of power once supply becomes precarious.

The Philippine Independent Power Producers Association has filed a case against the ERC to oppose and stop the secondary cap, but so far no court order has been issued.

For the Manila Electric Co. (Meralco), the secondary cap is pro-consumer especially if it results to lower generation rate.

Meralco spokesman Joe Zaldarriaga said its generation charge was lower this month partly due to the cap on electricity it obtained from the spot market.

Nevertheless, Zaldarriaga said next month's distribution charge will be lower by an average of P0.15/kwh, so even if the generation charge spikes, it can be tempered by the lower distribution charge.

Meanwhile, Bayan Muna Rep. Neri Colmenares said the government must penalize power plants that go on shutdown as it breaches contractual obligations with the distribution utilities and eventually consumers.

Colmenares said imposing sanctions will push power plant owners to make sure it minimizes unplanned shutdowns.

The ERC explained that there are no sanctions at all for plants that bog down. Juan said if a plant is on shutdown, it also does not earn and loses opportunity to sell electricity.

But an unannounced or emergency shutdown further shaves off a limited excess power in the grid creating alerts that usually push prices up.