ERC mulls imposing price control on WESM
Saturday, November 25, 2006
Barely on its fifth month of commercial operations and yet the Wholesale Electricity Spot Market (WESM) is now trailing the messy experiment of California on price capping that triggered its power crisis.
The danger signs have already been laid down with the decision of the Board of the Philippine Electricity Market Corporation (PEMC) to revert to what was deemed as artificially-low load weighted average price of P3.079 per kilowatt hour (kWh) in the second month with blanket application to third and fourth month billings.
The Energy Regulatory Commission (ERC) has similarly given strong prescriptions that it may impose price control if any party is rendered with finality to be culpable of manipulating prices at the spot market.
"In resolving the investigation or dispute, the ERC may, in the exercise of its authority and if warranted by the evidence adduced, impose price controls and order the disgorgement of excess profits," the regulatory body said in a press statement.
ERC chairman Rodolfo B. Albano added "we assure the public that ERC will act with dispatch and utmost impartiality on this matter," noting that the regulator will exercise its mandate to penalize the party who committed violations.
The regulatory body though has yet to receive formally the report of the PEMC on the alleged price manipulation.
With the decision on supposedly price freeze to second month without clear evaluation of market dynamics during the last two months, industry players are now raising concern that WESM is passing on a message to the public that the spot market now serves as a venue for subsidized electricity rates and will never be reflective of the true cost of power.
On the third month, the PEM Board on the recommendation of its Market Surveillance Committee chaired by Danilo Mercado, tagged the Power Sector Assets and Liabilities Management Corporation (PSALM) manipulating prices at the WESM because of similar and identical offers made its trading team starting August 30, 2006.
More questions, however, have been hurled on the lack of PEMC’s action to investigate the first two months when various parties complained that prices have been suspected to be below market, and are thus, subsidized.
PSALM president Nieves L. Osorio in fact disclosed the higher price offers made in the third month were meant to recover huge losses in the first two months of the WESM’s commercial operation.
In the PEMC’s investigation result, it was indicated that the three trading teams of PSALM representing separately Pagbilao, Sual and Ilijan plants "were bidding in such a manner that caused the market clearing price to rise above competitive levels."
"The investigation found that PSALM had market power and was exercising it to the extent that it was an abuse of its power," it added.
The summary of findings though stressed the investigating team "did not find that the 3 PSALM trading teams agreed amongst themselves to trade collectively but it did find that the PSALM trading teams are structured in such a way that its top management can and , it seems, did exercise significant influence over each team’s individual strategies." (MMV)
posted by philpower @ 11:41 AM,
