ERC to cap costly power reserve prices

MANILA, Philippines — The Energy Regulatory Commission (ERC) is moving to impose a secondary price cap (SPC) in the Reserve Market to protect consumers from prolonged spikes in backup power costs.

Ahead of the resumption of Reserve Market operations, the ERC is proposing an SPC that would activate when prices exceed specified thresholds based on their rolling 72-hour averages.

Under the proposal, each type of reserve would have its own trigger level and corresponding price cap.

For regulating up reserves, the SPC would be set at P14.115 per kilowatt-hour when the three-day average price reaches P15.816 per kWh.

Regulating down reserves would have a cap of P14.548 per kWh once prices hit the P16.104-per-kWh threshold.

For contingency reserves, the cap would be P5.187 per kWh when the average price reaches P8.940 per kWh.

Dispatchable reserves, meanwhile, would be capped at P3.216 per kWh against a trigger level of P7.83 per kWh.

The SPC would be triggered separately for each reserve type in each grid. This means a price spike in one grid would not automatically trigger the cap in another, while lower costs in one grid would not offset elevated prices in another.

Ancillary services or power reserves help keep the grid stable during supply-demand imbalances.

Regulating up and down reserves adjust power generation in real time to keep the grid balanced.

Contingency reserves provide backup power when major plants or transmission lines suddenly go offline, while dispatchable reserves are standby capacities that can be activated when demand rises unexpectedly.

“Reserves are necessary to keep the grid secure, but consumers should not pay excessive prices for them,” ERC chairman and CEO Francis Saturnino Juan said over the weekend.

Transmission system operator National Grid Corp. of the Philippines procures ancillary services through bilateral contracts or from the Reserve Market, where they are traded at spot prices.

The Reserve Market, co-optimized with the Wholesale Electricity Spot Market (WESM), began full commercial operations in January 2024.

By December that year, the ERC imposed an interim price cap of P25 per kWh on reserve offers.

Despite relatively low WESM prices in 2024 and 2025, the ERC said regulating reserve prices remained persistently high, particularly in the Visayas and Mindanao.

An ERC review also found that reserves procured from the spot market added an estimated P1.29 per kWh to electricity rates in the Visayas in 2025.

In contrast, reserves sourced through long-term bilateral contracts contributed only P0.02 per kWh.

This prompted the regulator to temporarily halt Reserve Market operations and undertake a redesign aimed at protecting consumers from sustained high prices.

For the SPC proposal, stakeholders may submit their comments until Nov. 13, ahead of the public consultation scheduled for Nov. 27.

“We are putting this safeguard on the table now so that it is ready before the Reserve Market resumes,” Juan said.