ERC Raises Secondary Price Cap in WESM to Curb Price Spikes, Ensure Grid Stability

The Energy Regulatory Commission (ERC) has approved revised rules increasing the secondary price cap (SPC) in the Wholesale Electricity Spot Market (WESM), aimed at mitigating sustained electricity price spikes while preserving investment signals for power generators.

Under the revised rules, the SPC has been increased by 19% to Php7,423 per megawatt-hour (MWh), from the previous level of Php6,245 per MWh. The trigger for imposing the cap has also been adjusted, with the SPC now taking effect when the 72-hour rolling average spot price exceeds Php12,413 per MWh, compared to the earlier threshold of Php9,000 per MWh.

The ERC said the adjustment is intended to support stable electricity prices and ensure a reliable power supply for consumers, particularly during periods of peak demand. By allowing generators to continue operating while limiting extreme price movements, the measure is expected to help maintain grid stability.

The SPC functions as a pre-emptive market safeguard that is activated when sustained high prices breach defined cumulative thresholds. When in effect, it temporarily limits spot market clearing prices, while still allowing eligible generators to recover verified costs under extreme supply and demand conditions.

The amendments were approved through Resolution No. 26, Series of 2025, adopted during the Commission’s meeting on 26 November 2025. The resolution amends Resolution No. 07, Series of 2021, which governs the pre-emptive price mitigation mechanism in WESM.

Under the revised framework, only oil-based and liquefied natural gas (LNG) power plants will be eligible to recover additional compensation during periods when the SPC is imposed, and only if their verified fuel and variable operations and maintenance costs exceed the cap. Other generation technologies were excluded after the ERC determined that their marginal costs are significantly lower.

The resolution also retains the regional or island SPC mechanism established under earlier rules, subject to the updated parameters. The regional or island SPC will apply only when grid interconnections are on outage and will use the same SPC value, cumulative price threshold, and 72-hour rolling average period as the system-wide SPC.

The cap will be imposed if the cumulative price threshold is breached on the system-wide rolling average by the 72nd hour and a high-voltage direct current link or island interconnection subsequently goes on outage.

ERC Chairperson and Chief Executive Officer Atty. Francis Saturnino C. Juan said the recalibration was necessary to ensure the price cap remains responsive to prevailing market conditions. “The recalibration was necessary to ensure the price cap remains responsive to prevailing market dynamics, particularly during peak demand periods when higher-cost plants are dispatched to meet electricity demand,” he said.