The Energy Regulatory Commission (ERC) on Monday bared the likelihood of lifting the so-called secondary price cap at the Wholesale Electricity Spot Market (WESM), the idea having been already presented to President Ferdinand Marcos Jr. in meeting with the Private Sector Advisory Council (PSAC) last week.
The secondary price cap protects consumers from unwarranted increases in electricity prices generated by volatile price movements at the WESM by lowering the clearing price of electricity to P6.245 per kilowatt hour (kWh) at the moment when the average price breaches the threshold of P9 per kWh over a 72-hour period under current calculations.
The PSAC recommendations include rationalizing the secondary price caps and strengthening of local government units (LGUs) to facilitate energy project implementation and the connection of small power utility groups (SPUGs) to the national grid.
The ERC is conducting a review of the implementation of secondary price caps, adding that under Republic Act 9136, generation prices are meant to be market-driven, with prices dictated by market forces.
However, the ERC said initial analysis indicate 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 and limit investor interest in the country’s 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.”
ERC chairperson Monalisa Dimalanta
Dimalanta said that in strengthening LGUs to facilitate energy project implementation, the ERC engages in collaborative efforts to ensure energy projects are put in place in a timely manner to address the increasing demand for electricity.
ERC said that its partnership with LGUs also include the promotion of the net-metering program and streamlining of processes for rooftop solar installations.
Earlier, Department of Energy Secretary Raphael Lotilla, also said the secondary price cap is one policy that must be revisited to help spur private sector investments in the power sector.