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Manila Bulletin devider Business devider Trade & Industry devider ERC weighs futures market to curb power price volatility

ERC weighs futures market to curb power price volatility

Published Jan 26, 2026 03:23 pm
ERC Chairperson Francis Saturnino Juan
ERC Chairperson Francis Saturnino Juan
The Energy Regulatory Commission (ERC) is exploring the implementation of forward and futures contracting to shield consumers from the extreme price volatility of the spot market.
Speaking at a roundtable discussion with Green Tiger Markets on Jan. 26, ERC Chairperson Francis Saturnino Juan said that the regulator is seeking to institutionalize instruments that could make electricity bills both more affordable and predictable.
Juan said the initiative targets the financial risks inherent in the Wholesale Electricity Spot Market (WESM), where fluctuating prices are often passed directly to end-users, leading to fluctuations in monthly billing.
“Our goal is to determine conclusively whether a structured forward contracting mechanism can be a win-win solution— enhancing market stability, encouraging sensible investment, and serving as a tool for affordable and reliable power for all,” he said.
By locking in rates through these new contracts, utilities can bypass the immediate impact of WESM price swings. Juan described the move as potential win-win solution that could enhance market stability and encourage sensible investment while serving as a tool for reliable power.
“For consumer protection, a well-designed framework could allow utilities to mitigate extreme price spikes, contributing to greater price stability, predictability for end-users over time, and avoidance of bill shocks,” Juan explained.
He further said that such system would allow utilities to mitigate extreme spikes, contributing to long-term price predictability.
Beyond consumer protection, the regulator views these financial instruments as a way to improve utility risk management, providing firms with better tools to manage their portfolios and engage in more prudent procurement planning.
The ERC also expects that forward and futures contracts will serve as a catalyst for infrastructure development.
By providing revenue certainty, these contracts make it easier for developers to secure financing for both baseload and renewable energy projects. This certainty is often the missing link in attracting the massive capital required to expand the national power grid and meet sustainability targets.
However, the transition to such a system requires a cautious regulatory approach. Juan emphasized that any new mechanism must be seamlessly aligned with existing power suppliers and market structures.
The commission is currently conducting due diligence to ensure that regulatory safeguards are robust enough to prevent market distortion.
The commission’s review is set to examine the specific regulatory frameworks required and how these new instruments will interact with the existing bilateral contract market. Juan maintained that the primary metric for success will be the tangible benefits delivered to the public, ensuring that any market evolution prioritizes the consumer's interests first.
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