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DOE brokering P11.585-billion ‘refund’ via reduced WESM rates

The Department of Energy is brokering a ‘payment arrangement’ for the P11.585 billion worth of refund to customers that may result from the reduced Wholesale Electricity Spot Market (WESM) rates as earlier decided by the Energy Regulatory Commission.

Energy Secretary Carlos Jericho L. Petilla, who is also chairman of the board of market operator Philippine Electricity Market Corporation (PEMC), reportedly called all affected stakeholders last Monday for discussion on the amount that the power generators must settle or pay back because of the slashed WESM rates in November and December 2013 supply months.

The amount will be coming from the generation companies (GENCOs) and will be held by WESM operator PEMC and shall subsequently be lined up as refund to the customers of the distribution utilities (DUs) covered by the March 3 ERC ruling which substantially trimmed down the WESM rates.

It will primarily cover Manila Electric Company (Meralco) which had extreme exposure then to volatile WESM prices.

On Wednesday, the power generators were called again to discuss the terms of payment of the DOE-brokered settlement arrangement, but many of them are objecting to it because the earlier verdict of the industry regulator had not been based on any outcome of an investigation and had also obliterated regulatory and market processes.

Under the draft terms, it was proposed that the payment duration for diesel plants will be for 24 months – representing 50 percent of the total payable for the first year; while the remaining 50 percent for the second year.

For non-diesel plants, the recommended payment of their WESM dues as anchored on reduced WESM rates will be over 12 months.

It was further prescribed that the calculated amounts must be “payable monthly with the regular WESM bills,” commencing this June 25 billing at an interest rate based on the 91-day Treasury Bill rate plus 2.0 percent per annum.

The effectivity of the payment arrangement, as proposed, will be “in the event that a final order is rendered by the ERC” in Case No. 2014-021 MC.

The relevant parties are similarly prodded to agree “that they may refund or return such amounts which have been paid in excess within 30 days from receipt of such final Order or decision, or notice from PEMC of any excess amount.”