OUTAGES, GRID LIMITS: Why Visayas electricity rates jumped 42 percent in June

By Francis Allan L. Angelo

Wholesale electricity prices rose sharply in the June billing period as tighter power supply pushed up rates across all major grids, with the Visayas recording the biggest increase.

On Thursday, data from the Independent Electricity Market Operator of the Philippines (IEMOP) showed the system-wide average Wholesale Electricity Spot Market (WESM) price climbed 22.7 percent to PHP 9.56 per kilowatt-hour (kWh) for the June billing period (May 26 to June 25), from PHP 7.79 per kWh previously.

The increase came as average supply slipped 1.1 percent to 21,133 megawatts (MW), while average demand eased 1.9 percent to 15,454 MW.

The WESM works like a trading floor for electricity. Power plants sell the electricity they produce, while distribution utilities and other large users buy what they need to serve homes and businesses. When supply gets tight, prices go up, and those higher costs can later show up in the generation charge portion of monthly electricity bills.

In simple terms, the country as a whole had enough power in June. The problem was location. Power plants in the Visayas and Mindanao broke down or went offline more often, and the transmission lines that carry cheaper electricity from Luzon to the Visayas were already full for much of the month, so the extra supply could not get to where it was needed.

That mismatch is why consumers in the Visayas face the sharpest price pressure, even though the national supply picture looked stable on paper.

Despite the twin declines, the system-wide average supply margin actually improved to 3,691 MW from 3,629 MW in May, meaning the price spike was driven not by an overall shortage but by localized supply tightness and reserve deficiencies that triggered Constraint Violation Costs in real-time market prices.

REGIONAL DISPARITIES

The regional picture explains the divergence. Luzon’s supply margin rose by 278 MW, but margins in the Visayas and Mindanao fell by 83 MW and 132 MW, respectively, owing to higher outage levels, supply constraints relative to demand, grid alert issuances, and variations in high-voltage direct current (HVDC) flows.

The Visayas posted the steepest price increase, with average WESM rates surging 41.7 percent to PHP 14.46 per kWh from PHP 10.20 per kWh, after regional supply fell by 178 MW against a demand decline of only 12 MW.

The region saw multiple yellow and red alerts and market interventions due to generation deficiencies during the billing period, with recurring reserve shortfalls adding further pressure. The highest average regional price was recorded on June 22 at PHP 21.68 per kWh.

Mindanao followed with a 37.5 percent jump to PHP 12.75 per kWh from PHP 9.28 per kWh, as supply and demand fell by 213 MW and 55 MW, respectively. Its highest average regional price also came on June 22, at PHP 22.75 per kWh, following outages of several large generating units, with reserve deficiencies likewise observed.

Luzon recorded a 13.3 percent increase to PHP 7.95 per kWh from PHP 7.02 per kWh. Supply in the region rose by 149 MW while demand fell by 234 MW, but forced outages of several large generating units throughout the billing period kept market conditions tight. The region’s highest average price was logged on May 29 at PHP 17.86 per kWh.

“Grid alerts are more commonly associated with the summer months, when electricity demand is typically higher. This year, however, continued generating-unit outages and tighter regional supply conditions extended beyond the summer period, particularly in the Visayas and Mindanao. At the same time, new generating capacities are progressively entering the market, which should help support the country’s growing electricity requirements,” said Engr. Isidro E. Cacho Jr., IEMOP Vice President for Trading Operations.

GRID LIMITS

Transmission limits deepened the regional split. The Leyte–Luzon HVDC link, which normally allows the Visayas to draw power from Luzon, operated at its maximum Luzon-to-Visayas transfer limit of 250 MW or at a security-limited level for 67.46 percent of the billing period, up from 46.06 percent in May.

The Mindanao–Visayas HVDC link, with a transfer limit of 450 MW, ran at maximum for 39.36 percent of the period, down from 51.84 percent. These constraints restricted the flow of lower-cost Luzon generation into the Visayas and contributed to the price separation between Luzon and the Visayas–Mindanao grids.

Forced outages weighed heavily across all grids. Luzon posted the highest daily cumulative forced outage of 3,060.5 MW, mostly from hydro, coal, and natural gas plants, alongside planned outages peaking at 758.30 MW.

The Visayas logged forced outages reaching 2,295.23 MW, mostly from coal and geothermal facilities, plus 490.1 MW of planned geothermal outages, forcing the region to rely heavily on imports from Luzon and Mindanao. Mindanao’s forced outages peaked at 1,186.70 MW, with 237.50 MW of planned outages from hydro plants.

PRICE SAFEGUARDS

The supply strains were severe enough to trigger the market’s built-in safeguards, which kick in when normal pricing breaks down or prices run too hot.

The first safeguard, called Administered Pricing, replaces market prices with pre-set rates whenever the grid operator intervenes, such as during Manual Load Dropping, the deliberate power cuts more commonly known as rotating brownouts. This was in effect 7.71 percent of the time in the Visayas, but only 0.01 percent of the time in both Luzon and Mindanao, showing how much more often the Visayas grid needed emergency intervention.

A second mechanism, the Price Substitution Methodology, corrects prices that get distorted when transmission lines are congested and regions become cut off from cheaper supply. It applied 17.71 percent of the time in Luzon, 15.24 percent in the Visayas, and 17.20 percent in Mindanao.

Finally, the Secondary Price Cap acts as a ceiling that automatically limits prices when they stay high for too long, protecting consumers from runaway costs. Sustained high prices activated the cap 11.10 percent of the time in Luzon, 14.75 percent in the Visayas, and 15.55 percent in Mindanao. Under the new rules, the cap of PHP 7.423 per kWh kicks in once average prices breach a cumulative threshold of PHP 12.413 per kWh.

GENERATION SIDE

On the generation mix, renewable energy accounted for 21 percent of total output. Coal-fired generation slightly decreased from 58.6 percent to 57.9 percent, while natural gas held steady at 18 percent, and oil-based generation rose from 1.7 percent to 2.2 percent.

Solar output declined from 6.7 percent to 6.2 percent, while hydro rose from 5.4 percent to 6.2 percent, primarily on higher water availability from the rainy season. Pumped storage hydro slipped from 0.9 percent to 0.7 percent, wind eased from 0.6 percent to 0.5 percent, and biomass and battery units were unchanged at 1.0 percent and 0.2 percent, respectively.

Spot market volume fell to 15.1 percent of total traded quantity from 17 percent in May, but the total trading amount climbed from PHP 29.50 billion to PHP 36.57 billion on the back of higher prices.

In the reserves market, zonal prices decreased except for Luzon’s Regulation Up and Dispatchable Reserve, the Visayas’ Contingency and Dispatchable Reserve, and Mindanao’s Contingency and Dispatchable Reserve.

Total system-wide reserve market transactions rose from PHP 6.03 billion in May to PHP 6.65 billion in June, largely due to increased trading amounts across the three grids. The reserve market’s contribution rate inched up from PHP 0.56 per kWh to PHP 0.61 per kWh, indicating a higher cost allocation per kWh of energy.

All reserve commodities in Luzon recorded higher trading amounts. Regulation Up and Regulation Down maintained relatively stable spot levels, while Contingency Reserve saw reduced spot exposure as the ancillary services procurement agreement (ASPA) share rose from 52 percent to 60 percent, and Dispatchable Reserve saw higher spot exposure as its ASPA share fell from 34 percent to 29 percent.

The Visayas showed the opposite trend, with trading down across all commodities as spot quantities declined from 212 MW to 149 MW. In Mindanao, all commodities posted lower trading amounts, except for Contingency and Dispatchable reserves, where maintained ASPA participation of 85 percent resulted in lower clearing prices and reduced spot exposure.

“June 2026 was a volatile month for the WESM. While the country had sufficient supply overall, outages, reserve shortages, and transmission limitations created tighter conditions in some regions. Market prices reflected these conditions and showed where additional supply, reserves, and transmission capacity were most needed,” Cacho added.