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Tuesday, July 23, 2024

ERC starts review of secondary price cap at electricity spot market

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The Energy Regulatory Commission said Monday it started the review of the secondary price cap imposed at the spot market, but conceded that its removal may have an impact on consumer protection.

It said in a statement it began conducting a review of the SPC which was first implemented a decade ago to protect consumers from the unwarranted increase in electricity prices brought about by inherent volatile market price movements at the Wholesale Electricity Spot Market.

The regulator said Republic Act No. 9136 states that generation prices should be market-driven or dictated by market forces.

It said its initial analysis showed that with SPC in place, price signals are distorted and actual market results do not necessarily reflect the true cost of generation. This blurs planning exercises on energy security and dampens investors’ interest to in the Philippine power generation sector, it said.

“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,” ERC chairperson Monalisa Dimalanta said.

“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,” Dimalanta said.

The SPC removal is one of the proposals of the Private Sector Advisory Council, which met with President Ferdinand Marcos Jr. on March 9, 2023.

Energy Secretary Raphael Lotilla earlier said DOE was also studying removing the SPC imposed in 2013 “but this has been difficult to lift at this time because of the impact on prices but we will have to deal with this if we want to get more investments down the line.”

The ERC imposed an SPC of P6.245 per kilowatt-hour upon breach of a P9-per-kWh rolling average price over three days at the electricity spot market to protect the public and prevent the repetition of excessive and unreasonable high market prices.

PSAC’s recommendation for the energy sector includes rationalization of the SPC, strengthening of local government units to facilitate energy project implementation and the connection of small power utility groups to the grid.

The Philippine Independent Power Producers Association Inc. has been calling for the removal of the SPC to entice investors to build more power plants.

“The secondary price cap needs to be re-evaluated, and we are pushing for a removal or at the very least gradual removal to send the correct signals to our investors,” PIPPA president and executive director Anne Estorco Montelibano said.

“More investments will lead to sufficiency in supply and competitive prices. We note that the increase in fuel/coal prices is not only an issue of electricity prices but also in making sure that investments will not falter. As such, PIPPA will continue to advocate for the removal of the secondary price cap,” the group said.

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