For an import-dependent power system like the Philippines, where fossil fuels still provide close to 80 percent of electricity generation, this does not augur well for us.
Recent IEMOP data show that WESM is highly sensitive to fuel and supply shocks, even in “normal” times.
Price trends
In early 2025, system-wide average prices were around P3.00/kWh when supply margins were comfortable, then climbed toward P4.50/kWh as margins thinned in later months.
In some tight episodes, Luzon–Visayas prices temporarily pushed into P7–8.5/kWh despite the absence of a global war-driven fuel shock. These “pre-war” prices provide a realistic baseline for constructing stress-test scenarios under today’s more hostile fuel environment.
A practical way to frame the risk is through marginal cost curves by fuel. Coal, which
supplies roughly 60 percent of the Philippine energy generation, still anchors the baseload segment but remains exposed to increases in seaborne coal prices and freight costs.
Gas-fired plants, contributing around 15–17 percent of generation, sit further up the stack and will feel both oil-linked contract adjustments and spot LNG price spikes. While oil and diesel units provide only a sliver of total generation, they dominate the far right tail of the merit order. As peakers, these plants often determine the marginal price of electricity each hour.
Experts say coal and gas marginal costs could shift cost curves upward by 15–25 percent, and oil and diesel peakers by 30–40 percent, reflecting tighter shipping conditions and higher commodity benchmarks.
I believe WESM prices could rise to around P4.00–4.50/kWh in the second quarter and P4.50–5.00/kWh during the summer months, when electricity demand typically peaks.
Impact on small island grids
The SPUG - the small island grids - of National Power Corp. will feel the pain, and this translates to higher prices for ordinary consumers by way of the subsidy we all pay via the Universal Charge for Missionary Electrification.
However, if disruptions occur in the delivery of LNG, oil, and coal, price increases could become more severe. In that scenario, experts predict that coal and gas marginal costs could rise by 30–40 percent, while oil-based peaking costs could increase by 50 percent or more relative to recent norms—especially once the effects of a weaker peso are factored in.
Recommendation
Taking the Ukraine-Russia conflict as a basis, I think spot prices will frequently spike into the P8–10/kWh range. I already said that the Philippines will have more of these hourly spikes in the coming years.
None of the generators can absorb the fuel price increases and forex deterioration that are coming.
Once again, I propose the same solution I recommended when the Russia–Ukraine conflict erupted. The government can work with local banks to create a fund that would cover the additional costs passed on to consumers in 2026.
These costs could then be amortized over 15 years, reducing the impact on the cash flows of businesses and households.
The government should not wait. It should act now.
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
