ENERGY Regulatory Commission (ERC) chair lawyer Francis Saturnino Juan said Monday that any proposal to introduce electricity hedging in the country must be thoroughly studied to ensure it benefits both investors and end-users.
In an interview on the sidelines of the “Preventing Bill Shock” roundtable at the PSE Building in Bonifacio Global City in Taguig City, Juan said any new power-sector service must comply with existing policies and laws.
He said that in other countries, electricity hedging involves derivatives such as forward contracts linked to wholesale and spot market prices.
However, Juan said hedging is not currently among the options available to distribution utilities (DUs) to secure supply, as only power supply agreements (PSAs) are allowed, subject to ERC approval.
“We’re getting the impression that these forward contracts are financial contracts and they’re not actually physical or bilateral supply contracts as per use in Section 45 (of the Electric Power Industry Reform Act of 2001). So, if these are not, will they still be submitted to ERC?” he said.
Juan also cited risks, including the possibility of prices falling after DUs or electric cooperatives (ECs) lock in agreements.
He said electricity prices are currently affected by factors such as fuel costs, bilateral contracts, and weather- and demand-related conditions.
He added the ERC will study all these factors since regulators are “keen on exploring every available mechanism that will ultimately redound to the benefit of the consumers.” (PNA)
