ERC trades higher cap for stability

Electricity rates may run higher during peak periods, but consumers are expected to face fewer and shorter price spikes after the Energy Regulatory Commission (ERC) raised the secondary price cap in the Wholesale Electricity Spot Market (WESM).

The regulator said Wednesday that the secondary price cap, under the revised rules, was increased by nineteen percent to P7,423 per megawatt-hour from P6,245 per megawatt-hour.

The cap will now be imposed only when the seventy-two-hour rolling average spot price exceeds P12,413 per megawatt-hour, up from the previous P9,000 per megawatt-hour trigger.

ERC Chairperson and Chief Executive Officer Atty. Francis Saturnino C. Juan said the recalibration was needed to reflect market conditions.

“The recalibration was necessary to ensure the price cap remains responsive to prevailing market dynamics, particularly during peak demand periods when higher-cost plants are dispatched to meet electricity demand,” he said.

According to ERC, the mechanism acts as a pre-emptive check on sustained price surges. By allowing prices to rise higher before the cap kicks in, the ERC said more power plants can keep running during tight supply conditions, reducing the risk of extreme or prolonged price spikes that can sharply lift electricity bills.

The amendments were approved under Resolution No. 26, Series of 2025, adopted on 26 November, amending the ERC’s pre-emptive price mitigation rules.

Only oil-based and liquefied natural gas power plants will be allowed to recover additional compensation while the cap is in effect, and only if their verified fuel and variable operating costs exceed the cap.

Other generation technologies were excluded after the ERC found their marginal costs to be significantly lower.

Likewise, the ERC retained the regional or island price cap mechanism for grids affected by outages, applying the same price cap, cumulative threshold, and seventy-two-hour rolling average used for the system-wide cap.