ERC eyes lower price cap for power reserves

The Energy Regulatory Commission (ERC) is eyeing to lower the price ceiling for power reserves traded in the spot market to PHP 9 per kilowatt-hour (kWh), offering much-needed relief for consumers.

In a draft resolution, the ERC is proposing an offer price ceiling equivalent to PHP 9,000 per megawatt-hour (MWh), or PHP 9 per kWh, for reserves, also known as ancillary services, that are traded in the Wholesale Electricity Spot Market (WESM).

The proposed price is significantly lower than the interim price cap of PHP 25,000 per MWh, or PHP 25 per kWh, that was set in 2024.

Launched in January 2024, the reserve market allows the system operator to buy power reserves from the WESM — the trading floor of electricity — to meet the reserve requirements of the energy system.

These reserves are backup power capacity dispatched by the grid operator to sustain the balance in the power system when supply and demand suddenly change.

Under the proposed resolution, the ERC is also proposing to maintain the floor price in the reserve market at PHP 0 per MWh to ensure “a fair, competitive, transparent and efficient electricity market.”

The commission said it would review the offer price floor and cap every five years, or when deemed needed.

ERC Chairperson and Chief Executive Officer Francis Saturnino C. Juan said the new cap seeks to directly lower prices in the reserve market as more generators would be encouraged to enter into supply contracts instead.

“This adjustment is intended to encourage greater participation in ancillary services procurement agreements (ASPAs), which provide a more stable and predictable alternative to reserve market procurement,” Mr. Juan told BusinessWorld.

The ERC chief said a lower ceiling price narrows the gap between market exposure and long-term contracted rates, giving generators stronger incentives to enter into ASPAs.

“Wider ASPA coverage, in turn, reduces the system’s reliance on high-priced reserve market transactions and supports more stable, lower reserve prices for consumers,” he said.

The National Grid Corp. of the Philippines, the country’s sole grid operator, earlier attributed the slight increase in transmission rates for July electricity bills to higher ancillary service charges.

Ancillary charges increased by 10.18% to PHP 0.7955 per kWh for the June supply period from PHP 0.7220 per kWh in the previous month. — Sheldeen Joy Talavera, Reporter