THE Energy Regulatory Commission (ERC) said it is reviewing the secondary price cap after the Energy department said its removal could attract more investment in energy.
“The ERC is evaluating the mechanics of the secondary price cap given, on one hand, its clear mitigating impact on rates charged to consumers exposed to WESM (Wholesale Electricity Spot Market) prices; on the other hand, the distortion it creates on price signals that should have allowed us to see the real cost of generation and need for more capacity,” ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said in a Viber message.
Energy Secretary Raphael P.M. Lotilla said in a forum on Monday that the Department of Energy (DoE) will take a market-driven approach to attracting investment to the industry.
Mr. Lotilla said the secondary price cap was difficult to lift because of its impact on prices but the DoE “will have to deal with this if we want to attract more investments.”
The secondary price cap seeks to temper volatility in power markets by capping price rises after a set threshold is breached.
Ms. Dimalanta said that for several months last year, the price cap was triggered in more than 50% of trading intervals in the WESM. “This means that the cap — instead of the market — was setting the price.”
The ERC set the secondary price cap at P6.245 per kilowatt-hour (kWh) upon breach of a P9 per kWh rolling average of the generator-weighted average price for a three-day period.
Last year, the Philippine Independent Power Producers Association, Inc. proposed the removal or review of the secondary price cap as it distorts the true cost of power. — Ashley Erika O. Jose