ERC Imposes Price Cap on Visayas, Mindanao Spot Power Rates

MANILA, Philippines — The Energy Regulatory Commission (ERC) has ordered the regional implementation of the secondary price cap (SPC) in the Wholesale Electricity Spot Market (WESM) for the Visayas and Mindanao grids, a move expected to slash electricity spot rates from nearly P20 per kilowatt-hour to below P9 per kWh. The decision, dated September 10, is retroactive to the August billing period. The ERC intervened after finding that the existing system-wide SPC mechanism was failing to shield consumers in the Visayas and Mindanao from "extraordinarily high" prices driven by tight supply conditions. In August, the Visayas grid experienced 652 hours of red and yellow alerts, while the Mindanao grid logged 89 hours. The Independent Electricity Market Operator of the Philippines (IEMOP) reported significant price surges, with Visayas WESM prices jumping 64.9 percent to P18.59 per kWh in August from P11.29 per kWh in the previous month. Mindanao saw an even steeper increase, with its average spot rate surging by 88.2 percent to P19.56 per kWh from P10.39 per kWh. In contrast, Luzon's spot price decreased by 34.2 percent to P4.80 per kWh from P7.30 per kWh. Under previous rules, the SPC was triggered only when the rolling average price across Luzon, Visayas, and Mindanao exceeded a prescribed threshold. The ERC's review, however, found that the system-wide computation "significantly understated" the frequency and severity of price spikes in the Visayas and Mindanao because lower Luzon prices masked them. To rectify this, IEMOP is now directed to implement the SPC separately for each region, starting with the August supply period. The impact will be reflected in consumers’ power bills this month. ERC simulations indicate that the regional SPC implementation could have reduced the average WESM rate in the Visayas by 54 percent to P8.47 per kWh from P18.59 per kWh. In Mindanao, the average spot rate could have fallen by 56 percent to P8.69 per kWh from P19.56 per kWh. ERC Chairman and CEO Francis Saturnino Juan stated, "This order shows that the commission does not simply watch prices climb and wait for the next billing cycle to ask questions. When our own data showed that the safety mechanism meant to catch these very price spikes was not catching them because Vis-Min's high prices were being masked by the low Luzon prices, we moved immediately and decisively." He emphasized that protecting consumers does not mean abandoning the market but ensuring it functions as intended, allowing generators to recover costs if scarcity is genuine, but intervening if other factors are at play. The ERC issued the order pursuant to its oversight authority over WESM and its mandate under the Electric Power Industry Reform Act (EPIRA) to protect consumers and promote market competition.