Watch out on Wesm prices this Holiday season-Laban Konsyumer


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October 13, 2020


Laban Konsyumer Inc. (LKI), through its president Atty.Victorio Mario A. Dimagiba, in a letter to Energy Regulatory Commission (ERC), Market Operations Service Director Sharon Montaner dated October 9, 2020 (acknowledged receipt by ERC records on October 12, 2020 ) said “we would like to write to your office regarding our group’s concern and wish for the energy sector and the regulator to stay alert on WESM prices, as these acted as triggers for the higher power rates this month.”
Dimagiba explained “Based on news reports, this month’s increase in generation charge is mainly due to higher Wholesale Electricity Spot Market (WESM) charges, brought about by tightened supply conditions and higher demand.”

The consumer group highlighted “The Malampaya natural gas restriction from August 28 to September 6 and forced outage of several large plants in the first week of September tightened the supply conditions in the Luzon grid. This led to WESM offer cap of P32 per kWh being hit on September 5 and 7, despite the absence of Yellow Alerts.”

Dimagiba pointed out “Higher Luzon demand and more generation capacity on outage resulted in P1.1605 per kWh increase in WESM rate. Had WESM prices remained at their August 2020 levels, the generation charge and the overall rate this month would have decreased by 8-centavos and 14-centavos, respectively.”

The consumer group explained “Here we see that if WESM rise was avoided, we still could have been enjoying lower power rates. While it is true that demand went up, even with the plant outages, NGCP did not need to raise a Yellow Alert. This meant that there were adequate reserves in the grid, with no threat of supply inadequacy. Hence it was surprising that prices still reached P32/kwh in two separate days even as supply remained sufficient.”

Dimagiba reasoned “The last time there was a Yellow Alert was last June. At that time, WESM prices did not hit P32/kwh. Thus, the recent spikes appear odd. We call on stricter and closer watch on WESM and a monitoring of the spot market prices and activities.”
The group continued “Therefore, Laban Konsyumer proposes automatic internal review in PEMC of the WESM prices, to assess what triggered the cap. The cap was reached twice, September 5 and September 7. We wish PEMC to do their job of monitoring the spot market and reporting its findings to the ERC. Checks and balances must be made to see if this is aboveboard.”
Dimagiba stressed “We note that there is a primary offer cap of P32/kwh, which is the highest price that a genco may offer at any time. However, even with primary offer cap, there is concern that gencos can game this and keep prices high, but just below the offer cap. For example, the price can be set at P20/kwh. This will be below the offer cap but still high.”
LKI further stated “This is the reason a secondary cap was introduced. It kicks in when high prices are sustained. The trigger is if the price averages P9/kwh in a five-day period. Unfortunately, the recent ERC proposal to update the secondary cap was shelved, as was reported to the Senate Energy Committee.”
Dimagiba said “WESM must be checked, and the public, as well as consumers, deserve to be assured that the market is working fairly, justly, and correctly. It is ERC’s job to ensure that WESM is regulated properly and there are no abnormal activities that will disadvantage the customer.”

LKI concluded by saying the group looks forward the quickest action from the ERC on the points brought up in this letter for the benefit of all consumers. END

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