No 6-peso rate increase due to WESM settlement price adjustments-ERC

The ERC (Energy Regulatory Commission) clarified that it has not approved a PhP6.00/kWh increase in the rates of DUs (distribution utilities), including MERALCO. The clarification was made by the ERC to correct the report appearing in the 04 September 2007 issue of a major daily saying otherwise.

The news report cites the ERC’s Decision dated 14 August 2007 in ERC Case No. 2006-080RC, which allegedly allowed such increase. “The report apparently misinterpreted the said Decision. The ERC merely allowed PEMC (Philippine Electricity Marketing Corporation) to use the actual settlement prices for the 3rd and 4th WESM (Wholesale Electricity Spot Market) billing months,” ERC Chairman Rodolfo B. Albano, Jr. said.

The Decision, in effect, just allows the recovery by generation companies of the difference between the NPC-time of use rates and the market settlement prices from the distribution utilities that purchased power through the WESM.

It may be recalled that the ERC initiated an investigation on the alleged anti-competitive behavior in the WESM during the third and fourth billing months. During the investigation, the ERC directed PEMC to provisionally apply the NPC-TOU (time of use) rates for these months which were lower than the actual WESM settlement prices.

Having found no sufficient basis to warrant further proceedings against PSALM for market power abuse in the WESM, the ERC promulgated the Decision dated 14 August 2007 upholding the actual settlement prices as dictated by the market during said period. “These prices were determined in an unregulated market and the ERC has nothing to do with the setting of these prices, and neither could it intervene to regulate these prices,” Chairman Albano stressed.

The impact, however, of the pass-on to customer of distribution utilities with transition or bilateral supply contracts is mitigated since only the portion not covered by contracts will be subject to this differential. To further mitigate the impact, the ERC directed PEMC to relax its procedures to allow the staggered collection of this differential from the WESM customers.

September 5 , 2007