Primelectric backs price locks to chill power rate swings

By Francis Allan L. Angelo

Primelectric Holdings Inc. is backing the use of financial contracts in electricity procurement, saying the system could protect consumers from volatile power rates and provide greater predictability in billing.

The proposal, presented to the Energy Regulatory Commission (ERC), seeks to introduce locked and fixed contracting or forward contracts when purchasing electricity to shield consumers from unstable market prices.

Under a forward contracting system, power distributors would fix electricity rates at the time a contract is signed, preventing sudden fluctuations caused by changes in spot market prices.

Primelectric Holdings Inc. is the parent firm of MORE Electric and Power Corp., which operates as MORE Power in Iloilo City, and Negros Electric and Power Corp., which operates as Negros Power in Central Negros.

Primelectric President and CEO Mr. Roel Z. Castro said the mechanism would benefit both consumers and investors, particularly during periods of volatile supply such as the summer months when demand typically rises.

“The forward contracts, hedging products and contracts for difference (CFD) can be very helpful in predicting energy prices and avoiding price shocks to consumers. Even for investors, having predictive and “stable” price is what they are looking for. What investors and consumers hate is unstable price and they get surprise when the bill comes. The hedging products, CFD’s and forward contracts will be very helpful and useful. However, the regulatory framework has to be in place. We are happy that the ERC is very responsive of this initiative,” according to Mr. Castro.

The proposal is linked to broader efforts to address price instability in the Wholesale Electricity Spot Market (WESM), where electricity prices can fluctuate depending on supply and demand conditions.

According to ERC Chairman and Chief Executive Officer Atty. Francis Saturnino C. Juan, the proposed system is considered a “win-win” solution that would ensure the cost of power from the source is fixed on the day the contract is signed.

“For consumer protection, a well-designed framework could allow utilities to mitigate extreme price spikes, contributing to greater price stability, predictability for end-users over time, and avoidance of bill shocks,” says Atty Francis Saturnino Juan.

Juan said the system still requires further study to determine whether it complies with existing regulatory guidelines and to assess its possible effects on bilateral contracts in the electricity market.

The move comes as distribution utilities and regulators explore mechanisms to temper power rate volatility, which can directly affect household and business electricity bills, particularly during high-demand seasons.

During peak summer months, tight power supply conditions and higher demand in the Wholesale Electricity Spot Market have triggered rate adjustments for distribution utilities, leading to increased monthly bills for residential and commercial consumers.

In earlier coverage, industry officials cited supply constraints, plant outages, and increased demand as key drivers of spot market price spikes, prompting calls for longer-term contracting strategies to cushion consumers from sudden rate surges.

Power distributors have also previously emphasized the importance of diversified supply portfolios and regulatory support to minimize exposure to volatile spot market prices, especially as electricity costs remain a major expense for households and small businesses.