Regulatory issues on commencement of WESM clarified - ERC
“Pursuant to Resolution 30, series of 2006 dated 22 June 2006, the Energy Regulatory Commission (ERC) clarified and provided guidance on certain regulatory issues upon commencement of the commercial operations of the Philippine Wholesale Electricity Spot Market (WESM),” Chairman Rodolfo B. Albano, Jr. said. “The ERC is aware of regulatory issues that may arise with the operation of WESM, some of which had already been brought to its (ERC) attention by the industry participants,” the ERC Chair added.
Cognizant of the urgent need to act on the matter, the ERC convened in a Special Meeting to address the issues and come up with policies or clarification thereon for the guidance of all stakeholders. The ERC has resolved to approve the policy directions relative thereto as follows:
1. On the treatment of the National Power Corporation’s (NPC) Deferred Accounting Adjustments (DAA) and Incremental Currency Rate Adjustment (ICERA), the ERC recognizes that DAA and ICERA pertain to expenses incurred in the past which are recoverable. Consequently, consumers will continue paying the same and all volume traded in the WESM will include settlement of the DAA and ICERA;
2. On the enforcement of the requirement that no distribution utility (DU) should source more than ninety percent (90%) of its total demand from bilateral contracts (as required under Section 45 of the Electric Power Industry Reform Act [EPIRA]), the ERC will reckon the 90% cap on power sourced from the bilateral contract pertaining to the DU’s total monthly demand. Any DU found to be in violation thereof will not be allowed to recover the costs corresponding to the volume in excess of the 90% cap from its customers through the Automatic Generation Rate Adjustment (AGRA) mechanism or some other applicable generation rate adjustment mechanisms that may be approved by the ERC;
3. On NPC and the Power Sector Assets and Liabilities Management Corporation’s (PSALM) designation as default wholesale suppliers, upon commencement of the WESM commercial operation, the ERC recognizes that as generators of last resort, NPC and PSALM already assume the risks attendant thereto and it is just fair and equitable for them to be allowed to charge premium rates for the supply of power in such capacity;
4. On the procurement of ancillary services, the ERC confirms that the responsibility of the System Operator should be governed by the Ancillary Services Procurement Plan;
5. On the dispatch protocol/minimum energy quantity (MEQ) issue between the NPC and the Manila Electric Company (MERALCO), the ERC declared inoperative, upon the start of WESM, the dispatch protocol provided in its Order dated 08 March 2006 in ERC Case No. 2005-289MC and ruled that the dispatch be based on the schedule arrived at in the market applying the WESM Rules.
“The
ERC hopes for a smooth commencement of the WESM commercial operation. Rest assure
that the ERC, which had proven itself to be proactive, will continue to be vigilant
in ensuring healthy competition and level playing field in the restructured
electricity industry,” Chairman Albano concluded.