THE Energy Regulatory Commission (ERC) has suspended spot-market trading of reserve power to curb high ancillary service costs, particularly in the Visayas, where these charges added P1.29 per kilowatt-hour (kWh) to electricity rates in 2025.
The suspension is expected to limit the impact of expensive reserve power purchases on consumers’ electricity bills while regulators review the procurement and cost-recovery framework for these services.
In a press release dated Oct. 12, 2026, the ERC said it had ordered the temporary suspension of the commercial dispatch and settlement of the Reserve Market in the Wholesale Electricity Spot Market (WESM), following persistently high prices since the market began full operations in January 2024.
The order, approved on Oct. 8 in consultation with the Department of Energy (DOE), will remain in effect until further notice.
Ancillary services are reserve power capacity that helps maintain grid stability when a power plant unexpectedly shuts down or electricity demand surges. The National Grid Corp. of the Philippines (NGCP) procures these services through long-term contracts and spot-market purchases, with the costs passed on to consumers through their electricity bills.
The ERC said reserve-market prices have remained elevated even as spot-market energy prices declined, with the Visayas and Mindanao grids bearing the brunt of the increases.
In 2025, reserve-market costs in the Visayas reached P19.57 billion, compared with P1.69 billion for contracted Ancillary Service Procurement Agreements (Aspas). The reserve market added P1.29/kWh to electricity rates, more than 60 times the P0.02/kWh impact of contracted services.
In comparison, reserve-market costs in Luzon reached P24.53 billion, contributing P0.30/kWh to electricity rates, while Mindanao recorded P3.71 billion in reserve-market costs, equivalent to P0.21/kWh.
The ERC said average regulation-up reserve prices in the Visayas remained at around P21/kWh, four to six times the spot price of electricity. In Mindanao, average prices rose from P4.39/kWh in late 2024 to P21.11/kWh in 2025.
The regulator attributed the problem partly to the higher returns available in the spot market, which discouraged providers from entering into firm, lower-priced contracts and left more reserve requirements exposed to expensive spot purchases.
Previous measures, including lowering the reserve-market offer price cap from P32,000 to P25,000 per megawatt-hour, have failed to resolve the problem, it added.
Under the suspension, NGCP will source reserve capacity only through existing Aspas at approved rates and from generating units designated as must-run to meet any remaining requirements. Payments for must-run capacity will be based on the ERC-approved Price Determination Methodology.
The commission said the arrangement would preserve the grid’s reserve capacity and maintain the reliability of electricity supply while reducing exposure to volatile spot-market prices.
Within 30 days, NGCP must submit a regional assessment of reserve requirements not covered by existing contracts and identify the capacity needed to meet the shortfall.
It must also pursue contracts for its full ancillary service requirements through competitive selection and direct negotiations where allowed and publish forecasts of future requirements to help potential providers, including battery storage developers, plan investments.
Within six months, NGCP, the Philippine Electricity Market Corp. and the Independent Electricity Market Operator of the Philippines must submit a proposal to redesign the Reserve Market.
The proposed changes must account for the growing contribution of battery storage and renewable energy, ensure contracted reserves are not displaced by spot bids, explore a more granular regional market structure for the Visayas and introduce offer caps based on technology or reserve type.
The proposed reduction in the reserve-market offer price cap under a separate ERC proceeding will remain on hold pending the redesign. Transactions covering billing periods before the suspension will not be affected.
The ERC said the review aims to improve reserve procurement and cost recovery while ensuring that the grid retains sufficient capacity to maintain a reliable electricity supply. / KOC