ERC declares 'market failure' caused by power generators

Posted at 03/11/14 1:43 PM

ERC voids high power rates from Nov-Dec 2013

MANILA, Philippines – The Energy Regulatory Commission (ERC) has declared “market failure” on the trading days at the electricity spot market during the Malampaya shutdown in November to December 2013.

The declaration of the market failure comes with an order to the Philippine Electricity Market Corporation (PEMC) to recalculate the figures during those times.

For consumers, this means the increase in generation charges in November, which was translated in December in the Meralco bill of P4.15 per kilowatt hour, which was temporarily halted by the Supreme Court, and the P5.33 per kilowatt hour that Meralco now wants to charge to consumers.

“The ERC found that there were factors that contribute to the inefficient allocation of resources, which already amount to market failure. Among these factors is the widespread violation by market participants of the must offer rule. Because of this, there was a contrived shortage in supply that also put upward pressure to market prices. The ERC has considered these market prices an aberration, and so it decided to intervene and qualify these prices,” ERC executive director Francis Juan said on Tuesday.

ERC’s order, dated March 3, also voided the WESM (Wholesale Electricity Spot Market) prices during the period from October 26, 2013 to December 25, 2013.

Juan added that this may lead to a reduction of more than half in the generation charges for December and January.

“We are seeing that the reduction will be more than half of this amount because of the substantial reduction in the WESM prices, at least 70% reduction, so there will also be a corresponding reduction in Meralco’s generation charge for the month of December and January,” he said.

The ERC has ordered PEMC to conduct an investigation on the possible breach of the must offer rule within a period of no less than 90 days from receipt of the ERC Order. -- Report from Alvin Elchico, ABS-CBN News