Rising tensions in the Middle East could spill over into the local power market, with regulators warning that higher global fuel prices may drive up electricity rates in the Wholesale Electricity Spot Market (WESM).

The Energy Regulatory Commission (ERC) said Friday it met with the Independent Electricity Market Operator of the Philippines (IEMOP) to review market simulations assessing how escalating geopolitical tensions could affect domestic electricity prices.

IEMOP projections showed that higher global fuel prices could place upward pressure on WESM prices, particularly if supply disruptions persist. 

The simulations examined scenarios involving increases in international coal, oil, and liquefied natural gas (LNG) prices, as well as possible supply constraints in the power system.

The analysis indicated that higher fuel costs could lead to increased WESM clearing prices as generators reflect higher fuel costs in their market offers.

“This is part of our proactive approach,” ERC Chairperson and CEO Atty. Francis Saturnino C. Juan said.

“We conduct stress tests to understand possible risks early and ensure that consumer protection mechanisms are in place should global fuel volatility persist,” he added.

Global fuel markets have been volatile amid heightened geopolitical tensions affecting oil and LNG supply routes, including developments around the Strait of Hormuz.

The country relies heavily on coal and LNG for power generation, making the sector sensitive to international commodity price movements.

According to IEMOP’s analysis, higher fuel costs alone may push up prices in the WESM, where electricity is traded in real time. 

Price pressures could intensify if large generating units experience forced outages, which may tighten supply and allow more expensive plants to set market prices.

IEMOP said final market data will be released over the weekend once Friday’s trading results are fully consolidated.

The ERC said regulatory safeguards remain in place, including the Secondary Price Cap mechanism, which is automatically triggered if sustained price spikes breach regulatory thresholds.

The commission also directed IEMOP and the ERC Market Operations Service to closely monitor market activity and report any unusual or suspicious behavior to ensure that no participant abuses market power or takes advantage of prevailing market conditions, particularly during periods of heightened global fuel price volatility.

“Our priority is to protect consumers from undue price volatility while ensuring a stable and reliable power supply,” Chairperson Juan said.

“Preparedness remains important given the Philippines’ exposure to global energy markets,” he added.