The Energy Regulatory Commission (ERC), as part of its preparation for the resumption of the redesigned Reserve Market, issued for public comment a draft resolution establishing a Secondary Price Cap (SPC) in the Reserve or Ancillary Service (AS) Market of the Wholesale Electricity Spot Market (WESM).
The proposal aims to protect consumers against sustained elevated reserve prices while promoting a more stable and competitive Reserve Market upon its resumption.
The reserve market is where the System Operator (SO) procures standby capacities or reserves not covered by Ancillary Service Procurement Agreements (ASPA) it executes with AS providers. These reserves can be called on quickly to keep supply and demand in balance and to respond when a plant or line trips. The SO’s AS cost is passed on to consumers through their electricity bills.
“We are putting this safeguard on the table now so that it is ready before the reserve market resumes.”
“Reserves are necessary to keep the grid secure, but consumers should not pay excessive prices for them. We are putting this safeguard on the table now so that it is ready before the reserve market resumes,” ERC Chairperson and CEO Atty. Francis Saturnino Juan said.
“At the same time, we are awaiting the submissions directed under our suspension Order, which may lead to broader revisions of the ancillary services policy and regulatory framework,” Juan added.
The reserve market began full commercial operations in January 2024. By WESM market design, scheduling of energy and reserves is co-optimized, so the grid always has enough reserve capacities available at the least cost. In December 2024, the ERC set an interim limit on reserve offers of P0 to P25,000 per megawatt-hour (MWh).
Reserve prices have nonetheless stayed high, particularly in the Visayas and Mindanao. While WESM energy prices fell from 2024 to 2025, regulating reserve prices went up. The ERC’s review found that in 2025, reserves bought from the spot market added an estimated P1.29 per kilowatt-hour to Visayas rates. Reserves bought under long-term ASPAs added only P0.02 per kilowatt-hour.
On October 12, 2026, the ERC suspended the commercial dispatch and settlement of the reserve market until further notice. It cited reserve prices that remained high compared with both WESM energy prices and approved ASPA rates. The suspension took effect on October 14, 2026. Existing ASPA contracts continue to supply the grid’s reserve needs in the meantime, augmented by additional plants that the SO designates as must-run plants.
The Commission is awaiting the submissions it directed under the suspension Order. These may lead to revisions in the existing ancillary services policy and regulatory framework.
Meanwhile, several stakeholders have proposed that the reserve market resume with safeguards against sustained high prices, including a separate secondary price cap. The reserve market has had no such cap until now. The cap that applies to the WESM energy market expressly excludes reserves.
The proposed SPC works like a circuit breaker.
The proposed SPC works like a circuit breaker. Independent Electricity Market Operator of the Philippines (IEMOP), the market operator, would track the rolling average price of each type of reserve over the last three days (72 hours). If that rolling average goes above a set trigger level, called the Cumulative Price Threshold (CPT), prices for that reserve type are held down to the secondary price cap.
| Reserve type | Trigger level (CPT), PhP/MWh | Secondary price cap, PhP/MWh |
| Regulating Up | 15,816 | 14,115 |
| Regulating Down | 16,104.75 | 14,548 |
| Contingency | 8,940.89 | 5,187 |
| Dispatchable | 7,830.07 | 3,216 |
The same values would apply in Luzon, the Visayas and Mindanao. The cap, however, would be triggered separately for each grid and each reserve type. High prices in one grid would not set off the cap in another, and low prices elsewhere would not mask a problem in one grid.
The values are based on actual reserve prices from February 2024 to December 2025. The ERC tested them against reserve prices from August 26 to September 25, 2026. In that test, average prices would have dropped by 12% to 50% in the Visayas and by 17% to 33% in Mindanao. Luzon would have seen no change, because its prices stayed below the trigger levels. This shows the cap acts only where prices stay excessive and leaves normal pricing alone.
The ERC has posted on its website the draft Resolution establishing the SPC in the reserve market for comment until November 13, 2026, with public consultation scheduled on November 27, 2026.
