The suspension is intended to ease pressure on electricity costs while allowing regulators to reform the procurement and pricing of reserve power.
The order, approved by the commission on Oct. 8 under ERC Case No. 2023-002 RC, took effect upon receipt by the Philippine Electricity Market Corp. (PEMC), the Independent Electricity Market Operator of the Philippines (IEMOP) and National Grid Corp. of the Philippines (NGCP).
In a statement on Oct. 12, the ERC said the suspension would provide time to review the regulatory framework governing reserve power procurement and how its costs are passed on to consumers.
The decision was made in consultation with and with the concurrence of the Department of Energy (DOE).
Energy Secretary Sharon Garin told a congressional hearing in Bacolod City in Negros Occidental earlier that the DOE was studying the suspension of the reserve market to mitigate elevated ancillary service prices, especially in the Visayas.
Ancillary services provide standby power capacity to maintain grid stability and ensure reliable electricity supply when power plants unexpectedly shut down or demand increases.
NGCP procures these services through long-term Ancillary Service Procurement Agreements (ASPAs) at approved rates and through the Reserve Market, where additional capacity is purchased at spot-market prices.
The costs of both arrangements are passed on to consumers through the ancillary service charges reflected in their electricity bills.
Visayas bears the brunt
The ERC's review of market data since the reserve market began full operations in January 2024 found that reserve power prices remained persistently high, with the Visayas and Mindanao experiencing the greatest pressure despite declining electricity spot prices.
In 2025, reserve power costs far exceeded those under contracted Ancillary Service Procurement Agreements (ASPAs) in Luzon and the Visayas.
In the Visayas, reserve procurement through the spot market cost P19.57 billion, compared with P1.69 billion under ASPAs. The ERC estimated that Reserve Market purchases added P1.29 per kilowatt-hour (kWh) to electricity rates, against just P0.02 per kWh under ASPAs.
In Luzon, reserve market costs reached P24.53 billion, compared with P12.75 billion under ASPAs. The corresponding impact on electricity rates was P0.30 per kWh for Reserve Market purchases and P0.09 per kWh for ASPAs.
Mindanao recorded P3.71 billion in reserve market costs, slightly below the P3.90 billion under ASPAs. The impact on electricity rates was P0.21 per kWh from Reserve Market purchases and P0.13 per kWh from ASPAs.
The ERC also found that the reserve market's impact on electricity rates in the Visayas was more than 60 times that of ASPAs.
Average regulation-up reserve prices in the Visayas remained at around P21 per kilowatt-hour (kWh), four to six times the electricity spot price. In Mindanao, the average rose from P4.39 per kWh in late 2024 to P21.11 per kWh in 2025.
According to the ERC, the price disparity discouraged providers from entering into firm, lower-priced contracts because they could earn more in the spot market. This left a larger share of NGCP's reserve requirements exposed to costly spot-market purchases.
The ERC said interim measures, including lowering the reserve offer price cap from P32,000 to P25,000 per megawatt-hour, had failed to address the problem.
Long-term contracts
During the suspension, NGCP will source reserve requirements from existing ASPAs at their approved rates. Any remaining requirements will be covered by designated must-run capacities, with compensation based on a cost-recovery mechanism approved by the ERC under the current Price Determination Methodology.
The arrangement is intended to keep sufficient reserves available while limiting exposure to volatile spot-market prices.
Within 30 days, NGCP must submit an assessment, broken down by region and reserve product, identifying the portion of its requirements not covered by ASPAs and the must-run designations needed to meet the shortfall.
NGCP must also aggressively contract its full ancillary service requirements through competitive selection and direct negotiation, where allowed, and publish forward-looking demand forecasts to help potential providers, including battery storage developers, plan investments.
Reserve Market redesign
The ERC has directed NGCP, the PEMC and IEMOP to propose a redesigned Reserve Market within six months.
The proposed reforms must account for changing reserve requirements as battery storage and renewable energy capacity expand, ensure contracted reserves are not displaced by spot-market bids, and examine a more granular regional arrangement for the Visayas.
The redesign must also consider offer price caps based on technology or reserve type and allow reserve providers connected to distribution utilities to participate.
Meanwhile, the proposed reduction of the reserve offer price cap under ERC Case No. 2026-013 RM has been held in abeyance pending the market redesign.
The commission clarified that reserve market transactions covering billing periods before the order will not be affected. —Ed: Corrie S. Narisma
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