ERC amends WESM price capping system

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The Energy Regulatory Commission (ERC) will be making changes to the imposition of the price mitigating measure in the Wholesale Electricity Spot Market (WESM) to ensure consumer safety nets and prevent price shocks amid tight power supply.

The amendments to the pre-emptive mitigating measures in the spot market will specifically focus on the cumulative price threshold (CPT) and the secondary price cap (SPC) mechanism.

ERC will lower the rolling average period from 120 hours or five day to 72 hours or three days.

The commission said that the imposition of an SPC of Php6,245 per megawatt-hours (MWh) upon breach of a Php9,000/MWh rolling price over a three-day period aims to protect the public and prevent the repetition of excessive and unreasonable high market prices. 

“Because of the imposition of the Secondary Price Cap (SPC) in May 2021, average price in WESM was at P7,428/MWh instead of P8,120/MWh.  That is for the 5 days rolling average.  If reduced to 3 days rolling average, resulting price would have been P6,338.66/MWh,” ERC Chairperson Agnes Devanadera said in a statement. 

ERC also decided to implement a regional or island SPC mechanism which will be applied when the grid interconnection is on outage. This mechanism will have the same SPC value, CPT, and rolling average period, similar to the system-wide imposition.

WESM operator Independent Electricity Market Operator of the Philippines said the SPC was imposed for 55 times in May as the supply in the grid was greatly affected by outages as high as 2,396 megawatts (MW) and deratings of 4,984MW, which triggered Yellow and Red Alerts in May and June.

This resulted in an effective settlement spot price of Php8.31 per kilowatt-hour last month.

As part of its process to amend the SPC, the ERC conducted a study and proposed to improve the existing mitigating measures which were presented to concerned stakeholders in Luzon, Visayas, and Mindanao through consultations back in November 2019.