Petilla backs secondary price cap at WESM

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THE Department of Energy (DOE) now supports imposing a secondary price cap for electricity traded on the floor of the Wholesale Electricity Sport Market (WESM), particularly during the summer months when power demand peaks, to ease price volatility.

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Energy Secretary Carlos Jericho Petilla said the imposition of a secondary price cap has been effective in helping ease volatility in the prices of electricity traded at the spot market, but he called for a review of the parameters for its imposition to allow power generators to recover their costs.

“The imposition of a price cap is nothing new. It is, in fact, a practice in other countries. It’s the parameters that need to be reviewed,” Petilla told reporters in an interview.

Petilla had earlier proposed that distribution utilities contract 100 percent of their power requirements if they wanted to avoid sharp spikes in power prices at the WESM, but power distribution utility Manila Electric Co. (Meralco) has said this could result in higher power costs for consumers.

The Energy Regulatory Commission (ERC) earlier set a secondary price cap of P6.245 per kWh for the May and June power supply months to mitigate the anticipated higher prices at the WESM.

It later extended implementation of the price cap by 120 days from August 10 pending the resolution of a permanent measure that would mitigate the impact of price volatility to consumers.

Petilla said merchant plants or plants without contracts should be allowed to recover their investments by filing an application with the ERC even with the imposition of the secondary price cap.

At the same time, Petilla also urged Meralco to carefully contract its power requirements next year even if the power distributor has already said it supports the secondary price cap instead of fully contracting its power requirements through bilateral agreements.

In a position paper submitted to the ERC, Meralco maintained that imposing a permanent secondary cap at the WESM was a “more reasonable measure than requiring distribution firms to fully contract 100 percent of their requirements through bilateral contracts.”

Meralco said that based on their simulations, a 100-percent contracting, if applied in the previous years of 2012 and 2013, would reflect a significant increase in the cost of power to consumers, ranging from P1.84 per kWh to P2.16 per kWh.

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