Green Tiger Markets proposed the use of financial hedging for distribution utilities to prevent sudden spikes in electricity prices and reduce the exposure of Philippine households and businesses to “bill shock.”
Experts suggest that financial hedging, a risk management practice common in liberalized power markets, could smooth retail electricity prices while maintaining the integrity of the Wholesale Electricity Spot Market.
The proposal aims to provide a buffer against the short-term market swings that often lead to unpredictable monthly costs for end-users.
“Financial hedging allows utilities to manage price risk proactively. By using tools such as contracts for difference, companies can reduce the impact of short-term market swings on consumers’ monthly bills without changing how electricity is physically delivered,” said John Knorring, chief executive and founder of GTM.
The company said these financial tools can reduce exposure to price fluctuations without affecting the actual flow of power.
Green Tiger Markets president Carlos Korten said that when applied responsibly, hedging can smooth out electricity costs over time to give both consumers and businesses more certainty. Korten noted that the goal is not to replace the market but to complement it to prevent price shocks.
“It’s not about replacing the market—it’s about complementing it to prevent bill shock,” he said.
International markets regularly utilize financial hedging to stabilize retail prices, protect vulnerable consumers and support long-term investment planning. In the Philippine context, these tools could serve as a risk management mechanism for distribution utilities and electric cooperatives, provided there is regulatory clarity and proper governance regarding cost pass-throughs.
Electricity price volatility impacts household finances, business operating costs and investment decisions. Forward-looking practices like hedging are seen as a way to mitigate these challenges and support a more resilient energy market.
Knorring said the conversation around hedging is about creating a stable and predictable environment that benefits both market participants and the consumers who ultimately bear the cost of volatility.
GTM said financial hedging tools, such as contracts for difference, can reduce exposure to short-term price volatility without affecting the physical delivery of electricity.
