MANILA, Philippines — The Energy Regulatory Commission (ERC) has imposed a maximum price of P25 per kilowatt-hour (kWh) for backup power offered to the National Grid Corp. of the Philippines, aiming to regulate costs in the reserve market.
During a recent meeting, the ERC set a price floor of zero per megawatt-hour and a ceiling of P25,000 per MWh, equivalent to P25 per kWh, for reserve power trading in the country.
The price floor and cap establish the range within which generation companies can offer their rates in 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.
Reserves, also known as ancillary services (AS), act as a safeguard to maintain the stability and reliability of the power grid by balancing supply and demand fluctuations, ensuring consistent frequency and voltage levels.
The ERC has also committed to reviewing the pricing guidelines every five years after the revised rules take effect or sooner if necessary.
The commission further instructed generation companies to 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 noted.
The P25 per kWh price cap is lower than the Department of Energy’s (DOE) initial ceiling but slightly higher than an earlier proposal by the ERC.
Previously, the DOE implemented a temporary price cap of P32,000 per MWh or P32 per kWh during the reserve market’s initial operations. However, the ERC found this rate “excessive” and introduced a more “reasonable” cap to control price surges and prevent excessive profits for AS providers, safeguarding consumer interests.
Earlier, the ERC also set a price ceiling of P19,000 per MWh or P19 per kWh for reserve trading under the Wholesale Electricity Spot Market (WESM).
The reserve market, integrated with WESM, aims to foster competition and ensure affordability while maintaining the grid’s security and reliability.
In March, the ERC temporarily halted billing and settlement in the reserve market due to a sharp rise in reserve costs compared to February.
Two months later, the suspension was partially lifted, allowing power generators to recover 30 percent of their transaction costs from March to sustain reserve operations.
By July, the ERC had fully lifted the suspension, paving the way for the reserve market’s full commercial operations in August.
Recently, the ERC approved the recovery of the remaining 70 percent of recalculated reserve trading costs, amounting to P3.05 billion. This will be collected beginning next month, spread over three months for Luzon and Mindanao participants, and six months for those in the Visayas.
