MANILA, Philippines — The Philippine government has moved to rein in soaring electricity costs after the Energy Regulatory Commission (ERC) suspended commercial trading in the country’s power Reserve Market, targeting unusually high charges that have burdened consumers, particularly in the Visayas.
The suspension took effect on October 14, 2026, following an ERC order that temporarily halted the commercial dispatch and settlement of reserve electricity under the Wholesale Electricity Spot Market (WESM).
The decision marks a significant intervention in the Philippine electricity industry, where the cost of maintaining backup power has become an increasingly expensive component of consumers’ electricity bills.
But while the regulator expects the move to reduce exposure to volatile reserve prices, one crucial question remains: Will the savings actually reach Filipino households and businesses?
Visayas Power Consumers Hit by Billions in Reserve Charges
Behind the regulatory intervention are figures showing how expensive backup electricity has become.
According to ERC data for 2025, reserve capacity purchased through the spot market in the Visayas cost approximately ₱19.57 billion, compared with just ₱1.69 billion for reserves procured through approved ancillary service contracts.
The corresponding impact on electricity rates was equally striking.
Reserve Market purchases contributed an estimated ₱1.29 per kilowatt-hour (kWh) to Visayas electricity rates, while contracted reserves contributed approximately ₱0.02 per kWh.
That means the reported rate impact of spot-market reserves was more than 60 times the impact associated with contracted reserves.
The problem was not limited to the Visayas.
In Luzon, Reserve Market purchases cost ₱24.53 billion, compared with ₱12.75 billion under ancillary service contracts. Mindanao recorded ₱3.71 billion in Reserve Market costs versus ₱3.90 billion for contracted reserves.
These figures reveal a widening concern over whether the Reserve Market has been delivering cost-efficient backup electricity.
Importantly, the amounts represent actual spending under different procurement arrangements, not an estimate that all spot-market purchases could have been replaced at the same price or that their full cost can now be refunded.
Why Backup Electricity Became So Expensive
Ancillary services act as the power grid’s emergency backup.
When a large power plant unexpectedly shuts down or electricity demand suddenly rises, the National Grid Corporation of the Philippines (NGCP) must have reserves available to help stabilize the system and prevent interruptions.
These reserves can be secured through approved Ancillary Service Procurement Agreements (ASPAs) or the Reserve Market, where prices can fluctuate according to supply and demand.
The ERC found that reserve prices remained elevated despite declines in regular electricity spot prices.
In the Visayas, average regulation-up reserve prices were approximately ₱21 per kWh, around four to six times prevailing energy spot prices during the periods examined.
Mindanao faced a similar challenge, with average reserve prices rising from ₱4.39 per kWh in late 2024 to ₱21.11 per kWh in 2025.
Regulators also observed that attractive spot-market earnings could discourage reserve providers from entering into longer-term contracts at lower approved rates.
Earlier attempts to control costs, including reducing the Reserve Market offer price ceiling from ₱32,000 to ₱25,000 per megawatt-hour, failed to resolve the underlying problem.
ERC Steps In as Power Affordability Becomes a National Concern
The suspension was undertaken in consultation with the Department of Energy, led by Secretary Sharon Garin.
ERC Chairman and CEO Francis Saturnino Juan characterized the intervention as a temporary corrective measure rather than a permanent abandonment of market-based reserve procurement.
The regulator’s objective is to limit excessive charges while preserving the backup electricity needed to protect grid reliability.
During the suspension, NGCP must rely on existing approved ancillary service agreements and designated must-run generating capacity for reserve requirements not covered by those contracts.
Compensation for additional must-run capacity will follow the applicable cost-recovery framework.
This means power reserves are not being eliminated. The government is changing how they are secured and compensated while the market undergoes review.
Visayas Power Crisis Goes Beyond High Electricity Prices
The intervention comes as the Visayas continues to experience pressure from insufficient reserves, power plant outages and transmission constraints.
Independent Electricity Market Operator of the Philippines (IEMOP) data showed that average wholesale electricity prices in the Visayas reached ₱12.42 per kWh in September 2026, rising from ₱11.81 per kWh in August.
The region also experienced multiple yellow and red grid alerts, reflecting supply shortages and threats to system reliability.
Transmission constraints have limited the ability of lower-cost electricity from Luzon to reach parts of the Visayas, worsening regional price differences.
The situation highlights a broader challenge: suppressing excessive reserve charges may improve affordability, but it cannot independently solve shortages in generating capacity, transmission infrastructure or reliable backup power.
Battery Storage Emerges as Part of the Solution
In a related development, the ERC granted provisional approval for an ancillary service agreement involving NGCP and East Asia Utilities Corporation’s battery energy storage system in Mactan, Lapu-Lapu City, Cebu.
The battery facility has a rated capacity of 44.72 megawatts and is expected to provide contracted regulating and contingency reserves.
The approved provisional reserve rate of ₱5.28 per kWh is considerably below the approximately ₱21-per-kWh average spot-market reserve price cited for the Visayas.
The Department of Energy has estimated that adding approximately 200 megawatts of battery storage capacity in the Visayas could reduce the occurrence of grid alerts by roughly half.
However, battery storage remains one part of the solution. Sufficient generation, competitive reserve contracts and stronger transmission connections will also be necessary.
Six-Month Deadline Could Reshape the Philippine Power Market
The ERC has directed NGCP, the Philippine Electricity Market Corporation and IEMOP to prepare proposals for a redesigned Reserve Market within six months.
The review is expected to consider improved pricing rules, technology-specific reserve price limits, better regional market arrangements and expanded participation by battery storage and other qualified providers.
NGCP must also assess its uncovered reserve requirements and pursue additional contracting arrangements to strengthen grid reliability.
The changes could reshape how reserve capacity is purchased and how its cost is ultimately passed on to electricity consumers.
Will Filipino Consumers See Lower Electricity Bills?
The immediate objective is to prevent consumers from continuing to absorb excessive reserve-market costs.
However, the suspension does not guarantee an automatic reduction of ₱1.29 per kWh, nor does it establish an immediate refund for past Reserve Market transactions.
Actual bill changes will depend on the cost of replacement reserve arrangements, electricity demand, other generation and transmission charges, applicable taxes and the timing of billing adjustments.
The ERC has also introduced a separate settlement-correction measure for unusually high electricity market line rental charges incurred between March 26 and April 30, 2026, with resulting eligible credits required to reach consumers.
That measure is separate from the Reserve Market suspension.
For households and businesses across Cebu, Negros, Iloilo, Bohol and the rest of the Visayas, the real test will come when electricity bills begin reflecting the new reserve procurement arrangements.
The Reserve Market freeze may be a major step toward more affordable electricity. But until lower charges translate into actual consumer savings — without sacrificing grid reliability — the Philippines’ power-cost crisis remains far from resolved.
