First Gen calls for price cap review to attract green energy investors
(2025/05/30-08:00)
MANILA, Philippines — Lopez-led First Gen Corp. is urging the government to re-examine market price caps to continue attracting investments in clean energy.
First Gen president and chief operating officer Francis Giles Puno said on Thursday that such market mechanisms “compress margins and scare off much-needed investments.”
He said such price caps could be removed “in an ideal world,” although this can be adjusted so that power generators, particularly merchant generators, could “make money” while selling electricity at the Wholesale Electricity Spot Market.
“There are regulatory policies and market mechanism structures that make critical power investments difficult to sustain,” Puno said in his speech during the listed firm’s annual stockholders’ meeting.
The secondary price cap is a mechanism that prevents extreme price fluctuations at the WESM, the central marketplace for trading electricity as a commodity.
The cap is currently set at P6.245 per kilowatt-hour when average prices breach the threshold of P9 per kWh over a three-day period.
“The way it's working right now is that at the time when the power is needed the most, the market intervenes. So, what's the incentive for you to operate? If that's the case, or even worse, what's the incentive for you to make more investments in merchant facility?” Puno said.
READ: First Gen expects 8th LNG delivery this month
'Not rewarding'
Puno pointed out that market mechanisms like these are “not rewarding” for the risk that power generators assume for supplying electricity through the spot market, as the merchant financing becomes “very problematic.”
“In other countries, they're very clear about that to make sure that there's more capacity being built to address, even if that capacity is merchant,” he told reporters.
The company executive also proposed other policy changes to entice businesses to venture into non-conventional sources of energy.
Puno said the competitive selection process (CSP) should be improved to offer more balanced commercial terms to power generators and investors.
He likewise suggested lowering the threshold for the Retail Competition and Open Access (RCOA) so that consumers can choose their electricity supplier.
READ: Retail competition in power sector expanded
In the CSP, distribution utilities hold a competitive bidding to secure the most competitively priced and reliable power supply for their customers based on the bids submitted by generation companies.
On the other hand, under the RCOA scheme, households with a monthly consumption of at least 500 kilowatts can switch to retail suppliers to buy cheaper electricity.
Puno called for greater government support to more predictable longer-term off-take energy deals as well as other commercially viable structures and credit guarantees for major infrastructure projects such as geothermal, hydro and liquefied natural gas-fired power plants.
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