ERC caps reserve market prices at ₱25/kWh

The Energy Regulatory Commission (ERC) has set  a price cap of Php 25 per kilowatt-hour (kWh) for backup power offered to the National Grid Corporation of the Philippines (NGCP).

Philippine Star reported that the ERC approved an offer price range in the reserve market, setting a price floor of zero per megawatt-hour (MWh) and a cap of Php 25,000 per MWh, equivalent to Php 25 per kWh.

This price range represents the minimum and maximum amounts that generation companies can charge in the reserve market.

The ERC stated that the interim pricing structure will be reviewed and recalculated one year after implementation, contingent on the availability of sufficient data from annual submissions by generation companies.

Ancillary services (AS), commonly known as reserves, provide backup power to maintain grid stability and ensure balanced frequency and voltage levels amidst supply-demand fluctuations.

The ERC plans to reassess its pricing guidelines every five years or sooner, depending on necessity.

Additionally, the commission has mandated that generation companies include their weighted average cost of capital in their annual management report submissions.

The new price ceiling of Php 25 per kWh for reserves is lower than the initial cap set by the Department of Energy (DOE) but higher than earlier recommendations by the ERC.

During the reserve market’s initial operations, the DOE imposed a temporary price ceiling of Php 32 per kWh or Php 32,000 per MWh.

However, the ERC deemed the DOE’s ceiling “excessive” and implemented a “reasonable” cap to prevent inflated market prices and excessive profits for AS providers, protecting consumer interests.

Due to this, the ERC had approved a cap of Php 19 per kWh or Php 19,000 per MWh for trading reserves in the Wholesale Electricity Spot Market (WESM).

In March, the ERC suspended billing and settlement in the reserve market after reserve costs surged significantly compared to February.

The suspension was partially lifted two months later, allowing power generators to recover 30 percent of the costs from March’s trading transactions to sustain operations.