Electricity prices in the Wholesale Electricity Spot Market (WESM) eased in February as improved supply in Luzon helped stabilize market conditions, although industry players remained wary of potential price pressures from geopolitical tensions in the Middle East.

Data from the Independent Electricity Market Operator of the Philippines (IEMOP), released over the weekend, showed that the system-wide average electricity price declined to P3.50 per kilowatt-hour (kWh) from P3.56 per kWh in January.

“IEMOP continues to closely monitor electricity supply and demand conditions in coordination with the System Operator and market participants to support the reliable and efficient operation of the power system,” the market operator said.

Average available capacity across Luzon, Visayas and Mindanao rose 4.4 percent to 19,992 megawatts (MW) in February, while demand increased 3.1 percent to 12,874 MW. Because supply grew faster than demand, the system maintained a larger buffer of available generation capacity.

Changes in WESM prices directly affect the cost of electricity purchased by distribution utilities, which in turn influences power rates paid by households and businesses.

Lower spot market prices can help ease electricity bills, particularly during periods when utilities rely more heavily on WESM supply, while sustained price increases can quickly translate into higher monthly charges for consumers and operating costs for industries.

Supply cushion

Luzon drove the price decline during the month after several generating plants returned to service following planned maintenance and outages. Electricity demand in Luzon increased by 442 MW, while available generation rose by 1,058 MW, improving the region’s supply margin by 732 MW.

The stronger supply cushion pulled the Luzon average market price down to P2.69 per kWh from P3.25 per kWh in January.

Average market prices in the Visayas and Mindanao rose to about P5.25 to P5.37 per kWh, compared with around P4.24 to P4.27 per kWh in January.

IEMOP said the Leyte-Luzon transmission interconnection frequently operated near its transfer limit in February, reducing the amount of lower-cost electricity that could flow to the Visayas. The Mindanao-Visayas interconnection also experienced periods of constrained transfers.

Renewable energy sources accounted for about 27 percent of total electricity generation during the month. Coal remained the largest source of generation, although its share declined compared with January, while output from natural gas, hydro and solar plants increased.

Electricity traded through the spot market accounted for 13.7 percent of total electricity traded, up from 13.1 percent in January.

However, the total value of spot market transactions declined to P10.76 billion from P11.16 billion due to lower electricity prices.