MANILA, Philippines — October 13, 2026 — The Energy Regulatory Commission (ERC) has ordered the temporary suspension of trading in the Philippines’ electricity reserve market after a regulatory review revealed billions of pesos in elevated reserve power costs, with consumers in the Visayas bearing some of the heaviest financial pressure.
The decision follows findings that reserve-market purchases in the Visayas reached a staggering ₱19.57 billion in 2025, compared with just ₱1.69 billion spent on reserve capacity secured through long-term ancillary service contracts.
The ERC estimated that reserve-market purchases contributed ₱1.29 per kilowatt-hour (kWh) to electricity rates in the Visayas, compared with only ₱0.02 per kWh from contracted reserve arrangements.
The regulator said the disparity demonstrated serious problems in how reserve electricity is procured and priced.
Approved on October 8 and announced on October 12, the suspension is designed to limit exposure to expensive spot-market reserve purchases while authorities overhaul the system.
But with electricity consumers already facing high power costs, the bigger question is whether the suspension will finally bring meaningful relief to household electricity bills — or reveal deeper problems in the Philippine power market.
ERC Orders Suspension of Electricity Reserve Market Trading
The ERC has temporarily suspended commercial dispatch and settlement in the Reserve Market under the Wholesale Electricity Spot Market (WESM).
The order was issued under ERC Case No. 2023-002 RC following consultations with and the concurrence of the Department of Energy (DOE).
It takes effect upon receipt by three major electricity-sector institutions:
- Philippine Electricity Market Corporation (PEMC)
- Independent Electricity Market Operator of the Philippines (IEMOP)
- National Grid Corporation of the Philippines (NGCP)
The suspension will remain in force until the ERC issues further orders.
Importantly, the directive applies to the commercial operation of the Reserve Market, not a blanket shutdown of the country’s electricity system.
The objective is to change how the grid obtains and pays for standby electricity capacity while maintaining the reserves needed to support reliable electricity supply.
ERC Chairperson and CEO Francis Saturnino C. Juan said the intervention was necessary because the existing reserve-market arrangement had been imposing excessive costs on electricity consumers.
The regulator intends to use the suspension period to review market design, procurement arrangements and pricing mechanisms.
Visayas Hit Hardest as Reserve Market Costs Reach ₱19.57 Billion
The ERC’s findings reveal a striking difference between reserve capacity purchased through the spot market and capacity secured under long-term contracts.
In the Visayas, reserve-market purchases cost ₱19.57 billion during 2025.
By comparison, reserve services obtained through approved Ancillary Service Procurement Agreements (ASPAs) cost ₱1.69 billion.
The difference in electricity-rate impact was even more pronounced.
Reserve-market purchases contributed an estimated ₱1.29 per kWh, while contracted reserves contributed only ₱0.02 per kWh.
This means the estimated rate impact of reserve-market purchases was more than 60 times that of the contracted arrangements.
However, the two procurement channels do not necessarily supply identical quantities or types of reserve services, so the difference should not be interpreted as a direct comparison of equivalent unit costs.
The figures nevertheless highlight why the ERC is concerned about the financial burden associated with reserve-market exposure.
For electricity consumers in the Visayas, the findings raise questions about how much of their power bills has been influenced by the design of the reserve market.
Luzon and Mindanao Also Face Billions in Reserve Costs
The problem is not limited to the Visayas.
The ERC’s review also identified substantial reserve procurement expenses in Luzon and Mindanao.
2025 RESERVE POWER COST COMPARISON
| Region | Reserve Market | Contracted ASPAs |
|---|---|---|
| Visayas | ₱19.57 billion | ₱1.69 billion |
| Luzon | ₱24.53 billion | ₱12.75 billion |
| Mindanao | ₱3.71 billion | ₱3.90 billion |
The regulator also estimated the following electricity-rate impacts:
| Region | Reserve Market | Contracted ASPAs |
|---|---|---|
| Visayas | ₱1.29/kWh | ₱0.02/kWh |
| Luzon | ₱0.30/kWh | ₱0.09/kWh |
| Mindanao | ₱0.21/kWh | ₱0.13/kWh |
In Luzon, reserve-market spending was nearly twice the amount paid under long-term ancillary service agreements.
In Mindanao, the total costs of reserve-market and contracted procurement were closer, although reserve-market purchases still had a greater estimated impact on electricity rates.
The regional figures demonstrate that reserve procurement can affect consumers differently depending on market conditions, contracted capacity and local supply requirements.
Why Are Electricity Reserves So Expensive?
Electricity reserves are essential for maintaining power system stability.
When a power plant unexpectedly shuts down or electricity demand rises, the grid needs additional generation capacity or other flexible resources to respond quickly.
These backup services, called ancillary services, help the system operator maintain the balance between electricity supply and demand.
NGCP obtains reserve capacity primarily through two arrangements.
The first involves Ancillary Service Procurement Agreements, which are contracts with providers at approved rates.
The second involves the Reserve Market, where eligible providers offer additional capacity at market-based prices.
Both procurement methods ultimately create costs that can be passed on to electricity consumers through ancillary service charges.
The ERC found that market prices for certain reserve products remained persistently high even when regular electricity spot prices declined.
This created a financial imbalance in the reserve procurement system.
Reserve Prices in Visayas Reach Around ₱21 Per kWh
The ERC found that average prices for regulation-up reserves in the Visayas remained near ₱21 per kWh.
That was approximately four to six times the prevailing regular electricity spot price, according to the regulator’s review.
In Mindanao, the average price for regulation-up reserves increased from ₱4.39 per kWh in late 2024 to ₱21.11 per kWh in 2025.
Regulation-up services help the power system respond when additional supply is needed to maintain the required operating frequency.
Their prices can reflect the availability of qualified providers, system conditions and market rules.
The ERC concluded that the unusually high reserve-market prices created incentives for certain providers to favor spot-market sales rather than commit to longer-term contracts.
As a result, a larger share of reserve requirements remained exposed to potentially expensive market purchases.
The commission had previously reduced the reserve offer price cap from ₱32,000 to ₱25,000 per megawatt-hour.
However, regulators concluded that this intervention was insufficient to resolve the underlying pricing problem.
NGCP Ordered to Use Long-Term Contracts During Suspension
To prevent a disruption in essential reserve services, the ERC has introduced an alternative procurement arrangement.
During the suspension, NGCP must first obtain reserve requirements through existing approved Ancillary Service Procurement Agreements.
Any remaining needs will be covered by capacity designated as must-run, with compensation based on an ERC-approved cost-recovery methodology.
A must-run designation requires a qualifying resource to remain available or operate as necessary to support the reliability of the electricity system, subject to applicable operating rules.
The arrangement is intended to ensure that adequate reserve capacity remains available without relying on the suspended commercial reserve-market mechanism.
The ERC has also directed NGCP to pursue contracts covering its full ancillary service requirements.
The regulator wants the transmission operator to prioritize more predictable procurement arrangements that can reduce exposure to volatile spot-market prices.
NGCP Given 30 Days to Identify Reserve Supply Gaps
The commission has imposed a specific reporting deadline on NGCP.
Within 30 days, the grid operator must submit a detailed assessment identifying reserve requirements not covered by existing contracts.
The report must be broken down by geographical region and reserve product.
It must also identify the must-run capacities needed to meet any remaining requirements.
The assessment will help regulators evaluate whether existing agreements provide enough reserve power to maintain reliability.
NGCP must also publish forward-looking demand forecasts so potential providers can better understand future reserve requirements.
The ERC expects more transparent forecasts to help encourage investment in flexible electricity capacity, including battery energy storage systems.
These requirements are aimed at preventing the suspension from creating a new supply problem while regulators address high market prices.
ERC Gives Energy Market Operators Six Months to Redesign the System
The suspension is not intended to be a permanent replacement for a competitive reserve market.
Instead, the ERC has directed NGCP, PEMC and IEMOP to submit a proposed redesign of the Reserve Market within six months.
The review must address several structural concerns.
These include:
- Ensuring that long-term contracted reserves are not unnecessarily displaced by spot-market offers.
- Updating reserve procurement rules to reflect the expansion of renewable energy and battery storage.
- Evaluating different offer price caps depending on technology or reserve type.
- Examining whether the Visayas needs more geographically specific reserve arrangements.
- Allowing eligible resources connected to distribution utilities to participate in reserve provision.
- Improving competition while protecting consumers from excessive reserve procurement costs.
The commission will evaluate the proposed reforms before deciding when commercial reserve-market trading may resume.
Meanwhile, a separate proposal to further lower the reserve offer price cap has been put on hold pending the redesign.
Transactions covering billing periods before the suspension order will remain unaffected.
Battery Storage Could Play a Bigger Role in Reducing Reserve Costs
The market overhaul could create opportunities for battery energy storage systems, commonly known as BESS.
Unlike conventional power plants, batteries can respond quickly to changes in grid conditions by releasing stored electricity.
Their fast-response capabilities make them particularly relevant for certain reserve services.
On October 12, the ERC announced that it had granted provisional authority for an ancillary service agreement involving NGCP and East Asia Utilities Corporation to provide additional battery-based reserve capacity for the Visayas.
The contract involves approximately 44.72 megawatts of battery energy storage capacity.
The ERC approved a provisional rate of ₱5.28 per kWh for the applicable reserve services, substantially below the roughly ₱21 per kWh average regulation-up reserve price observed in the Visayas.
The agreement remains subject to the regulator’s final evaluation and necessary compliance requirements.
The development suggests that competitively priced battery storage could help diversify reserve supply and reduce reliance on expensive spot-market purchases.
However, battery storage has its own investment, operating and duration limitations, and its cost advantages depend on the services being provided and the terms of each contract.
ERC Had Already Taken Action Against Other Visayas Power Charges
The latest reserve-market suspension is part of a broader series of regulatory interventions affecting electricity costs in the Visayas.
In August 2026, the ERC announced corrective measures addressing excessive line rental charges and problems in the allocation of electricity market settlement amounts.
Those measures involved suspending certain erroneous charges, recalibrating pricing formulas and auditing possible overcharges dating back to 2021.
The separate intervention highlighted how transmission constraints and market settlement rules can influence electricity costs paid by consumers.
Although line rental charges and reserve-market costs arise from different market mechanisms, both developments demonstrate the regulator’s continuing concern over electricity price volatility.
For consumers, the decisions may eventually affect different components of their electricity bills.
However, the timing and amount of any financial relief will depend on subsequent implementation, market conditions and approved billing adjustments.
Will Electricity Bills Finally Go Down?
For ordinary households, the most important question is whether the suspension will translate into lower monthly electricity charges.
The ERC’s intervention could reduce exposure to unusually expensive reserve-market purchases, especially in the Visayas.
However, it does not guarantee an immediate or fixed reduction in all consumers’ electricity bills.
Electricity rates also reflect generation costs, transmission charges, distribution charges, taxes and other regulated components.
Actual changes will depend on the cost of replacement reserve arrangements, electricity demand, contracted supply and the timing of billing adjustments.
The ERC has not announced a uniform nationwide bill reduction directly resulting from the reserve-market suspension.
Consumers should therefore distinguish between the regulator’s objective of lowering reserve procurement costs and a confirmed decrease in their individual electricity rates.
Bigger Challenge: Lower Electricity Costs Without Risking Power Supply
The ERC’s decision places Philippine energy regulators at a critical crossroads.
On one hand, consumers need protection from reserve-market prices that have remained elevated despite changing conditions in the wider electricity market.
On the other hand, the grid must maintain sufficient backup capacity to respond to emergencies and unexpected power supply disruptions.
The challenge becomes more complicated as the Philippines adds renewable energy projects and battery storage facilities to its electricity system.
A well-designed reserve market must encourage investment in reliable capacity while avoiding unnecessary costs for consumers.
Too little reserve supply could threaten grid reliability.
Excessively expensive reserves, however, can impose a heavy financial burden on households and businesses.
The commission’s six-month market redesign will therefore be an important test of whether regulators can strike the right balance.
The ERC has taken the extraordinary step of suspending reserve-market trading after billions of pesos in high ancillary service costs — but the real test begins now: Can the Philippines lower electricity bills, strengthen grid reliability and prevent another reserve-price crisis from hitting consumers?
