MANILA, Philippines — The Energy Regulatory Commission (ERC) has introduced a price cap of P25 per kilowatt-hour (kWh) for backup power offered to the National Grid Corp. of the Philippines.
During a recent meeting, the ERC decided to set a minimum offer price of zero per megawatt-hour and a maximum of P25,000 per MWh, equivalent to P25 per kWh, in the reserve market.
The price floor and cap represent the minimum and maximum prices that generation companies can propose within the reserve market.
“The interim offer price floor and cap shall be reviewed and recomputed one year after its implementation, contingent on the collection of sufficient data from the annual submissions of generation companies,” the ERC stated.
Ancillary services (AS), or reserves, are designed to provide backup power, ensuring that the grid maintains balance and stability despite variations in supply and demand. These services help regulate frequency and voltage to keep the system running smoothly.
The ERC announced it would conduct a review of the pricing guidelines every five years after the revised rules are implemented or sooner if deemed necessary.
In addition, the commission has mandated that generation companies include their weighted average cost of capital in their annual management reports.
“Upon collection of sufficient reportorial requirements and data from generation companies, the commission will initiate a review,” the ERC added.
The newly established P25 per kWh price cap for reserves is lower than the initial ceiling set by the Department of Energy (DOE) but higher than an earlier recommendation from the ERC.
During the reserve market’s initial operation, the DOE implemented a temporary price cap of P32,000 per MWh or P32 per kWh. However, the ERC found this amount “excessive” and decided to implement a more “reasonable” limit to curb inflated prices, prevent excessive profits for AS providers, and protect consumers.
Previously, the ERC adopted a price ceiling of P19,000 per MWh or P19 per kWh for reserve trading in the Wholesale Electricity Spot Market (WESM).
The reserve market, integrated with WESM, aims to enhance competition and affordability by optimizing schedules and prices for energy and reserves while ensuring grid security and reliability.
In March, the ERC suspended billing and settlement in the reserve market after observing a significant rise in reserve costs compared to the previous month.
Partial trading resumed two months later, allowing power generators to recover part of the costs incurred during March transactions. Specifically, 30 percent of the transaction amounts were approved for settlement to ensure continuous reserve operations.
The ERC fully lifted the trading suspension in July, leading to the market’s full commercial resumption by August.
Recently, the ERC approved the collection of the remaining 70 percent of the recalculated reserve trading amounts, totaling P3.05 billion. Recovery of this amount will begin next month and will be staggered over three months for participants in Luzon and Mindanao and six months for those in the Visayas.
