ERC wants longer-term power reserve deals

MANILA, Philippines — The Energy Regulatory Commission (ERC) is pushing for longer-term ancillary service procurement agreements (ASPAs) to limit the grid operator’s exposure to the Reserve Market.

ERC chairman and CEO Francis Saturnino Juan said allowing the National Grid Corp. of the Philippines (NGCP) to lock in contracts beyond five years would help shield consumers from price shocks.

“What we want is a market that will truly serve our consumers while at the same time encouraging participation and more investments by our generation companies,” Juan said in an interview.

Asked how long the contracts should run, he said they should have a “minimum of 10 years.”

As the sole buyer of reserves, the NGCP secures ancillary services or backup power to keep the grid stable during unexpected surges in electricity demand or sudden disruptions triggered by power plant outages.

These services can be procured through ASPAs or from the Reserve Market, where they are traded at spot prices.

ASPAs currently have a five-year term, after which the NGCP must hold another competitive selection process (CSP) to secure new bilateral contracts with power producers.

Juan, however, said some power producers choose not to participate in the CSP if they expect to get better prices in the Reserve Market.

Reserve Market operations remain suspended following an ERC review that found persistently high ancillary service prices, particularly in the Visayas and Mindanao.

In 2025, Reserve Market costs far exceeded those under ASPAs, putting additional upward pressure on electricity bills nationwide.

ERC data showed that Reserve Market prices added as much as P1.29 per kilowatt-hour to power bills last year, compared with a maximum of just P0.13 per kWh under ASPAs.

Ancillary service charges account for the bulk of the transmission costs passed on to consumers. The NGCP does not earn from these costs, as they are remitted to generation firms providing power reserves to the grid.

According to Juan, longer-term ASPAs would also help power producers secure financing for their projects and recover their investments over time.

“I’m a firm believer of markets, but these markets must be well designed so that they can operate in a transparent manner,” he said.

Following the suspension of the Reserve Market, the ERC has started consulting industry stakeholders to identify ways to improve the market. It is now preparing a formal proposal for submission to the Department of Energy.

The DOE had earlier blamed NGCP’s delays in securing ASPAs for the yellow and red alerts in the Visayas, which caused rotational brownouts.

The NGCP, however, argued that reduced generating capacity triggered the grid alerts, emphasizing that ancillary services should not be treated as replacement power.