The Energy Regulatory Commission (ERC) has hinted the possibility of lifting the secondary price caps in the Wholesale Electricity Spot Market (WESM) after the idea was officially presented to President Marcos Jr. in a meeting with the Private Sector Advisory Council (PSAC) last week.
The secondary price cap serves as a consumer protection from unwarranted increase in electricity prices due to the inherent volatile market price movements in the WESM . The cap effectively lowers the clearing price of electricity to P6.245 per kilowatt hour (kWh) when average prices breach the threshold of P9 per kWh over a 72-hour period.
During the meeting, PSAC recommended the following: rationalization of the secondary price caps, strengthening of local government units (LGUs) to facilitate energy project implementation and the connection of small power utility groups to the national grid.
ERC said it is conducting a review on the implementation of secondary price cap, adding that under Republic Act 9136, generation prices are intended to be market-driven with prices dictated by market forces.
However, ERC said its initial analysis shows that with the secondary price cap in place, price signals are “distorted” and actual market results do not necessarily reflect the true cost of generation as it also “blurs” planning exercises on energy security, apart from limiting investors’ interest in the Philippine power generation sector.
“The ERC needs to do a balancing act, as is the role of the regulator in our system. We need to ensure that the regulatory framework incentivizes investors to pour in more capital by building additional power plants to bolster the country’s supply requirements. At the same time, we cannot discount the fact that the price cap is a preventive measure to protect the consumers from the immediate impact of high market prices,” said ERC chairperson Monalisa Dimalanta, in a statement.
Meanwhile, Dimalanta said in the area of strengthening LGUs to facilitate energy project implementation, the ERC is engaging in collaborative efforts to ensure energy projects are put in place in a timely manner to address the increasing demand for electricity.
ERC said its partnership with LGUs also included the promotion of the net-metering program and streamlining of processes for rooftop solar installations. – Jed Macapagal
