ERC amends the pre-emptive mitigating measure in the WESM

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With the intent to update its current policy and address concerns on the price spikes in the Wholesale Electricity Spot Market (WESM), the Energy Regulatory Commission (ERC) introduced amendments to its Resolution No. 4, Series of 2017 entitled “A Resolution Adopting Amendments to the Pre-Emptive Mitigating Measure in the WESM”. The amendments will clarify the ERC’s policy on the Cumulative Price Threshold (CPT) and the imposition of the Secondary Price Cap (SPC) mechanism.

In particular, the amendment to ERC Resolution No. 4, series of 2017 are as follows:

A. Lowering of the rolling average period from 120 hours or five (5) days to 72 hours or three (3) days.

B. Imposition of Regional/Island imposition of the SPC mechanism which shall be applied when the grid interconnection is on outage. The regional/island SPC mechanism shall have the same SPC value, CPT and rolling average period similar to that of the system-wide imposition and shall be applied during certain conditions.

The ERC conducted a study and proposed to improve the existing mitigating measures which were presented to the concerned stakeholders in Luzon, Visayas, and Mindanao through public consultations held in November 2019. The comments gathered from the stakeholders during the public consultations were considered in the amendments to the pre-emptive mitigating measure in the WESM. The amendments to the SPC will be covered in an amended resolution that the Commission will be promulgating in the coming days.

“Because of the imposition of the 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 and CEO Agnes VST Devanadera explained.

The ERC, in its effort to update its regulatory policies to adapt to new developments in the electric power industry adopted in 2017 the pre-emptive mitigating measure in the WESM considering the highly volatile nature of the spot market and the possibility of market power abuse in order to ensure consumer protection. The imposition of a SPC of P6,245/MWh upon breach of a P9,000/MWh rolling average price over a 3-day-period aims to protect the public and prevent the repetition of excessive and unreasonable high market prices.

“The Commission is cognizant of the country’s need for additional capacity which will come from new investments. Nonetheless, we also need to implement mitigating measures such as the SPC in consideration of the paying capacity of the majority of the consuming public in pursuance of our mandate to exert efforts to minimize price shocks for the protection of consumers”, ERC Chair Devanadera averred. (PR)

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