ERC suspends power spot market operations amid energy crisis
The Energy Regulatory Commission (ERC) has temporarily halted the operations of the Wholesale Electricity Spot Market (WESM) across Luzon, Visayas, and Mindanao. This drastic measure comes as power prices are projected to surge, potentially hitting P9 per kilowatt-hour, exacerbated by the ongoing Middle East crisis and a declared state of national energy emergency.
The Energy Regulatory Commission (ERC) suspended Wholesale Electricity Spot Market (WESM) operations in Luzon and Visayas during red alerts starting April 30, 2024, to curb surging electricity prices amid El Niño-driven high demand. This measure was triggered by National Grid Corporation of the Philippines (NGCP) red alerts, with Luzon and Visayas grids under red alerts for about 20 hours as of April 25 due to peak demands straining capacities. The ERC issued the order on April 30, 2024, suspending WESM trading whenever NGCP declares a red alert, replacing spot market prices with the lower of the Administered Price or Secondary Price Cap. High heat index from El Niño caused power demand spikes, raising WESM average daily prices by 11% in Luzon and 53% in Visayas since April 16.
President Ferdinand Marcos Jr. directed the ERC to suspend WESM operations on red alerts to tame price increases, announcing this measure on May 1, 2024, during a Labor Day event. The suspension blocks spot trading during periods of high demand when the grid is under red alert status. ERC Chairperson Monalisa Dimalanta stated that the Commission was working hard to alleviate the impact of El Niño on the power system and mitigate the effects of extremely high demand resulting from the high heat index on consumers.
The legal basis for the suspension comes from the Electric Power Industry Reform Act (EPIRA) of 2001, which allows such measures during national calamities, with El Niño being classified as such. The suspension automatically lifts after 24 consecutive hours of positive capacity margin in the grid. The Department of Energy anticipated more alerts due to tight supply and potential outages, while the ERC noted investor hesitancy resulting from market interventions.
The market operator, Independent Electricity Market Operator of the Philippines (IEMOP), had not yet coordinated with ERC as of early May regarding the implementation details. The suspension affected both Luzon and Visayas grids, which were experiencing significant strain from peak demands, with Luzon facing a yellow alert on May 1 with 15,026 MW available versus a peak demand of 12,899 MW. This temporary measure was designed to protect consumers from price spikes while maintaining grid stability during the energy emergency.
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