Why the government paused the power market

By Francis Allan L. Angelo

Most consumers do not spend their mornings thinking about the Wholesale Electricity Spot Market, and frankly they should not have to, but when power prices start behaving like a panic trade and fuel shocks abroad begin dictating what Filipinos may pay at home, the jargon suddenly becomes very personal.

Think of the WESM as a stock exchange for electricity, where generators sell power into the grid and prices move depending on supply and demand, and what the government has now done is press pause on that market so regulators can take the wheel before volatility turns into a full-blown billing shock.

That pause is not theoretical, because the Energy Regulatory Commission suspended WESM operations across Luzon, Visayas, and Mindanao starting March 26 under the national energy emergency, after the Department of Energy recommended intervention, while the country shifts to special operating guidelines and a modified administered pricing scheme meant to reflect actual fuel conditions rather than pretend the market is still normal.

The urgency is easy to understand once the numbers are stripped of their acronyms, because Reuters reported that average spot power prices jumped 58% in March, with Visayas and Mindanao prices nearly doubling, while initial simulations cited by BusinessWorld showed WESM prices could climb as high as PHP 9 per kilowatt-hour from about PHP 5 per kilowatt-hour or less before the latest Middle East shock.

So this FAQ matters not just to generators, utilities, and regulators, but to households, businesses, and local governments that need to understand what this suspension really means, who pays, who gets protected, what happens to contracts, and whether this emergency fix can actually steady the system without quietly passing a bigger burden to consumers later on.

Thanks to Mr. Roel Z. Castro of MORE Power for this information.

Suspension of the Operations of the WESM and implementation of Modified Administered Price

1. Why is there a suspension of market operations?

The suspension of the operation of the Wholesale Electricity Spot Market (WESM) was triggered by the declaration of a State of National Energy Emergency under Executive Order No. 110 issued by Ferdinand Marcos Jr. on March 24, 2026, in response to the Middle East conflict, which threatened global fuel supply—particularly LNG and oil—and posed risks to national energy security, prompting the government to intervene in the electricity market

2. How will the power market and system operations be managed during the suspension of the market?

During the WESM suspension, an interim system dispatch arrangement following the Special Operating Guidelines (SOG) of the DOE will be implemented to prioritize available renewable energy, coal, and indigenous generation over LNG and oil-based plants. This measure aims to conserve imported fuel and promote the use of local energy resources. WESM suspension intends to optimize available resources and temper any rate increase.

3. What will happen to electricity prices when there is a WESM Suspension?

During market suspension, spot market operations are halted, and the market-based pricing (nodal prices) is replaced with Modified Administered Prices for settlement.

4. What is the Modified Administered Pricing?

ERC Rolls out the Modified administered pricing on April 1, 2026. The Modified Administered Pricing (AP) framework adopts a technology-based pricing scheme to more accurately capture current fuel costs and support the sustained operation of power plants. Under this approach, coal-fired facilities may receive a fixed rate, natural gas plants are compensated based on their contract prices, and renewable sources such as hydro and geothermal operate under administered pricing with priority dispatch. Oil-based plants, on the other hand, are paid using administered prices when they are either dispatched or under contract.

5. Prior to April 1, how will the administered price be calculated?

These administered prices are calculated based on historical WESM prices from recent similar trading intervals rather than real-time supply-demand conditions.

6. Will the administered price be lower or higher than the normal pricing conditions?

Administered prices are based on the average of the previous four weeks’ historical prices for each trading interval. Given the current supply constraints, electricity market prices are expected to increase (initial simulations by the WESM operator showed prices could “exceed” P9 per kWh); thus, administered pricing is considered more stable and potentially less costly over the long term. Its implementation helps shield consumers from short-term price volatility in the electricity market.

7. Will the administered price also affect the computation of line loss and congestion cost?

Yes. Line loss and congestion costs will likewise be computed using the applicable administered prices per region, subject to final market settlement and any corresponding adjustments or compensation mechanisms.

8. Will the WESM suspension and interim dispatch arrangement affect bilateral contracts?

Bilateral contracts with diesel generators may be affected as their dispatch will be controlled by the SO under the current SOG. Coal and other bilateral contracts will follow the nomination and price computation under the PSA.

9. What happens if a generator is not dispatched under the interim arrangement?

If a generator is not dispatched or is dispatched below its contracted level due to the interim arrangement, it may invoke a Force Majeure (FM) condition, subject to the terms of its contract. In such cases, the generator may seek regulatory relief or request the Commission to allow appropriate settlement or cost recovery for its contracted energy.

10. What are the forecast prices for WESM in the coming months? How are they affected by the current crisis?

The Department of Energy (DOE) said that initial simulations by the WESM operator showed prices could “exceed” P9 per kWh. The figure could translate to an increase of more than P5 per kWh from the average price of P3.50 per kWh logged in February.

11. What is the country’s current energy mix? How much is sourced from Oil? From Natural Gas?

The Philippines’ power generation mix is dominated by coal at about 60%, RE comprises about 22%, and smaller shares from natural gas (18%) and oil (less than 5%).

12. Until when will the current market suspension be in effect?

The market suspension shall remain in effect until the Energy Regulatory Commission (ERC) issues a Notice of Market Resumption.

13. What are the reports needed to be submitted by the DU.

Distribution utilities are required to submit the reportorial requirement on the computation of the generation charge and actual bills at the end of the month. If the projected generation charge will increase by more than P1 per kWH, the DU may request the ERC for approval of a staggered payment mechanism and charging to the customer bill.

14. What strategies can Distribution Utilities adopt?

To mitigate impacts, utilities can:

• Maximize utilization of embedded renewable energy generating units within franchise area
• Fast track connection of renewable energy into the distribution system
• Manage WESM exposure
• Strengthen portfolio diversification
• Closely monitor ERC issuances on administered pricing adjustments