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Spot mart says 16.14c in refund due consumers

By Riza Recio

04/28/2008

Electricity users in the Luzon Grid should get a refund equivalent to 16.14 centavos per kilowatthour due to the excess amount in the payment of electricity rates at the power spot market.

Dominant distributor Manila Electric Co. (Meralco) accumulated a so-called net settlement surplus (NES) worth a total of P9 billion or 16.14 centavos per kilowatthour (kwh) on payments made on purchases at the wholesale electricity spot market (Wesm) trading.

To implement the refund, however, the Energy Regulatory Commission (ERC) needed to issue an order for Meralco to reimburse the outstanding net settlement surplus due to consumers.

But the ERC has remained silent as to the total outstanding surplus refundable to consumers because in its most recent order it stated that the refund on NES would be used to mitigate the impact of Meralco’s one-time generation price adjustment of 16.62 centavos implemented also for the March billing.

Meralco said the refund of 16.14 per kwh represents the net effective surplus for Meralco’s overpayments on power purchases in September to October of 2006.

This was earlier validated by spot market operator Philippine Electricity Market Corp. (PEMC) saying a national transmission line congestion in the Luzon grid has caused power rates to rise by P1 per kwh and that in the first 3 months of spot trading beginning July 2006, some P1 billion in so-called net surplus on effective settlement prices (ESP) was collected by the Wesm from electricity buyers.

“A Transco line congestion causes electricity at the spot to rise by P1 per kwh representing the net surplus on ESP which we plow back to our customers because they paid for this,” an official said.

PEMC said establishing the accummulated net surplus as of December 2007 would be the job of the ERC so that the amount can be passed on to consumers.

The PEMC has a locational marginal pricing market management system that passes an independent international auditor review.

It has an audit committee, composed of three members, which is responsible for the conduct of quarterly audits of the market operator, settlement system and any other procedures and systems relevant to the spot market.

The net settlement surplus is defined by the industry as the surplus amount of money after all market transactions have been accounted for and is assumed to be attributable to economic rentals arising from other bidding constraints.

In the last quarter of 2007, the ERC had been conducting hearings for state firm National Power Corp. to become one of the witnesses on the redistribution of the net settlement surplus.