ERC Directs PEMC/Market Operator to Effect Rate Adjustments Due to Miscalculations

The   Energy   Regulatory   Commission  (ERC), in   an   Order    dated 1 August 2019, directed the Philippine Electricity Market Corporation/  Market Operator (PEMC/MO) to make the necessary adjustments to the Net Settlement Surplus (NSS) allocations and corresponding settlement calculations for the June 2018 to May 2019 billing months.

The directive is in view of the findings of the Commission, subsequently flagged to the PEMC/MO, on the inconsistencies in the share of generators and customers in the NSS allocations issued by the PEMC/MO. Upon validation, PEMC/MO reported to the ERC that the miscalculations were caused by its erroneous application of the formula in its software that is used to determine NSS allocations.  PEMC/MO has since applied the necessary corrections.

As a result of the corrections in the NSS allocations ordered by the Commission, WESM trading participants are expected to either be entitled to a refund or will be made to return excess allocations.  Adjustments resulting from the NSS correction by the PEMC/MO, covering the period from June 2018 to May 2019 involve an estimated One Billion Seven Hundred Seventy Four Million Pesos (PhP1.774B).   

The Commission directed the PEMC/MO to immediately effect the refund to consumers. Total refunds due our Luzon and Visayas consumers amount to PhP1.403 Billion.  Seventy seven percent (77%) or Php1.08 Billion of this will be refunded to consumers in the Meralco franchise area; while twenty three percent or PhP321.36 Million will be refunded to consumers covered by other distribution utilities and electric cooperatives.  The remaining amount of PhP371 Million will be due generation companies, retail electricity suppliers, and directly connected customers. We have directed PEMC/MO to immediately effect the refund, no later than the July 2019 billing period to benefit our consumers, said Chairperson Agnes VST Devanadera.

Eighty one percent (81%) of the amounts to be refunded will be collected by the PEMC/MO from generation companies and retail electricity suppliers which were allocated far greater settlement amounts than what were supposed to be due them.  The remainder will be collected from Distribution Utilities (DUs).

The PEMC/MO has submitted to the ERC its Plan of Action with respect to the collection scheme it proposes to implement for the recovery of amounts from specific DUs. They are under strict directives to ensure minimum impact among consumers who will be affected by the collection of over allocations of NSS.  

The PEMC/MO was also directed to submit monthly reports on their compliance with the Commission’s directive.   

“An audit of relevant PEMC/MO systems and operations may be in order. We need to ensure that market processes and transactions are accurately and efficiently carried out so as not to compromise the public benefit of reasonable electricity pricing, as well as to ensure that our consumers are spared from unnecessary burden,” said Chairperson Devanadera.

The Commission issued Rules for the Distribution of Net Settlement Surplus in 2009, and amended the same in 2018, providing for the immediate and equitable flow back of the NSS by PEMC to concerned parties.

The WESM Rules provide for the appointment of a Philippine Electricity Market Auditor by the PEMC who shall “conduct annual audits of the Market Operator and the settlement system and any other procedures, persons, systems or other matters relevant to the spot market.”