IEMOP backs review of secondary price cap amid high fuel prices
THE Independent Electricity Market Operator of the Philippines (IEMOP) said the Energy Regulatory Commission (ERC) needs to review the secondary price cap as market participants grapple with high fuel and power generation costs.
“As the market operator we see the merit of the call to review the price cap especially now that fuel prices and the production cost of power plants continue to increase, yet the price cap is low,” Robinson P. Descanzo, chief operating officer of IEMOP said in a virtual briefing on Feb. 10.
Power plant generators are entitled to additional compensation once the secondary price cap is triggered, according to an ERC resolution.
The secondary price cap limits the price that can be charged for power after certain price levels are breached within a short period. It is used by regulators to dampen volatility. The ERC set the secondary price cap at P6.245 per kilowatt-hour (kWh) after the breach of a P9 per kWh rolling average of the generator-weighted average price over a three-day period.
“What is happening here is the power plants recover their expenses through additional compensation, which is also provided by a mechanism of the secondary price cap,” he added.
ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said that Philippine Independent Power Producers Association (PIPPA) has filed a position paper seeking a review of the secondary price cap.
“We are studying how to balance it because the cap is helpful. It provides consumers with some protection but it also distorts (market) signals. The WESM (Wholesale Electricity Spot Market) is there to send us signals but if we have the cap, the signals are distorted,” she told reporters on the sidelines of an energy forum last week.
Anne Estorco Montelibano, president of PIPPA, said that the secondary price cap should be examined as it discourages investment in the power sector.
“We have been shouldering the cost; the government need to examine policies that would encourage investment,” Ms. Montelibano said.
“Since the ERC allows additional compensation claims, I think it is right to increase the price cap set; at the same time the additional compensation claims would be reduced significantly,” Mr. Descanzo said.
Energy Secretary Raphael P.M. Lotilla has also said that the Energy department would have to raise the secondary price cap to encourage more investment in the energy sector. — Ashley Erika O. Jose