The Energy Regulatory Commission (ERC) plans to slash the maximum offer price for power reserves by 64 percent to protect consumers from sharp rate spikes while preserving stability in the national electricity grid.

Under an eight-page draft resolution released by the utility regulator, the price ceiling for power companies bidding in the country’s reserve market will drop to ₱9,000 per megawatt-hour from the existing interim cap of ₱25,000 per megawatt-hour.

The proposed reduction is designed to curb aggressive bidding strategies by power producers and prevent severe cost pass-throughs from hitting end-users’ monthly utility statements.

The policy shift targets the Reserve Market, an essential trading platform within the Wholesale Electricity Spot Market where grid operators procure ancillary services.

These backup supply contracts function as the primary circuit breaker during unexpected power plant outages, ensuring continuous grid frequency and system reliability. Recent volatility in backup power costs has driven up transmission charges, prompting regulators to intervene.

Despite the steep price contraction, ERC said that the proposed ceiling maintains commercial viability for generation companies. The commission derived the ₱9,000 threshold through financial modeling that accounts for plant lifespans, fixed capital recovery, the weighted average cost of capital, fuel expenses, and fixed operating and maintenance costs.

Setting the ceiling too low risks rendering power plants unprofitable during critical periods, which could force operators to take facilities offline and deprive the grid of vital emergency capacity. By preserving a margin above fundamental generation costs, the regulatory body aims to avoid grid fragility while disincentivizing extreme price surge tactics.

To ensure market fairness, ERC maintained the minimum floor price at ₱0 per megawatt-hour. This zero-floor framework allows smaller power producers to compete transparently against larger market players, preserving price discovery based strictly on real-time supply and demand dynamics.

Narrowing the gap between spot prices and long-term contracted rates is also expected to encourage generators to enter into stable ancillary services procurement agreements rather than relying on spot exposure.

The regulatory agency will hold public consultations on Aug. 17 and 18 to gather feedback from industry stakeholders, consumer advocacy groups, and power producers. Following final approval, the commission plans to review the price ceiling and floor parameters every five years to align market rules with shifting macroeconomic conditions and fuel cost trends.