ERC starts revision of secondary price cap
The Energy Regulatory Commission (ERC) has begun reviewing the Secondary Price Cap (SPC), a mechanism that places a ceiling on electricity sold whenever Wholesale Electricity Spot Market (WESM) prices rise sharply.
While the secondary price cap is applied to protect consumers from higher WESM prices, the imposition of a cap limits new investment in the energy sector.
On Monday, the agency said it was already reviewing the price cap. However, initial ERC analysis showed that price signals are distorted in the presence of SPC, and actual market results do not necessarily reflect the true cost of generation. This makes planning for energy security difficult and dampens investor interest in the Philippine energy sector.
“ERC must balance, as well as the role of the regulator in our system. We need to ensure that the regulatory framework encourages investors to invest more capital by building additional power plants to meet the country’s energy needs.
At the same time, we cannot discount the fact that price caps are a preventive measure to protect consumers from the direct impact of high market prices,” said ERC Chair Monalisa Dimalanta.
Earlier, Energy Secretary Rafael Lotilla called the SPC one of the “stumbling blocks” preventing new investors from entering the Philippine energy sector.
“The secondary price cap was introduced back in 2013, but it is currently difficult to remove due to the impact on prices. But we will have to put up with it if we want to attract more investment in the future,” said Lotilla.
The Philippine Independent Power Producers Association (PIPPA) said the restriction does not reflect the reality of the energy sector.
“Back in 2014, PIPPA advocated for the abolition of the SPC to provide the proper price signal for additional investment in the generating sector.”