The Independent Electricity Market Operator of the Philippines has warned of higher electricity spot market prices due to heightened tensions in the Middle East.
IEMOP presented projections to the Energy Regulatory Commission indicating that higher global fuel prices could place upward pressure on rates in the Wholesale Electricity Spot Market, or WESM, particularly if supply disruptions persist.
Simulations examined scenarios involving increases in international coal, oil and liquefied natural gas prices, as well as possible supply constraints. The analysis indicated higher fuel costs could lead to increased WESM clearing prices as generators reflect those costs in market offers.
IEMOP’s analysis showed fuel costs alone may drive up prices in the WESM, where electricity is traded in real time. These pressures may intensify if forced outages of large generating units tighten supply. When supply is constrained, more expensive generators often set the market price.
“This is part of our proactive approach,” said ERC chairperson and chief executive Francis Saturnino Juan. “We conduct stress tests to understand possible risks early and ensure that consumer protection mechanisms are in place should global fuel volatility persist.”
The ERC met with IEMOP to discuss simulations assessing the potential impacts of escalating Middle East tensions on Philippine power prices. The coordination aims to ensure agencies are aligned and prepared for shocks to the power sector.
Global fuel markets have experienced volatility amid geopolitical tensions affecting supply routes, including the Strait of Hormuz — a key maritime corridor for about one-fifth of global oil and LNG shipments. The Philippines’ energy mix relies significantly on coal and LNG, making the sector sensitive to international commodity price movements.
The commission emphasized that existing regulatory safeguards remain operational, including the secondary price cap. This mechanism is automatically triggered if sustained price spikes breach regulatory thresholds.
The ERC also directed IEMOP and the commission’s Market Operations Service to closely monitor market activities and promptly report any unusual behavior. The directive aims to ensure no participant abuses market power during periods of volatility.
The agency added that early assessments allow the ERC to prepare mitigating measures to cushion the impact on consumers.
“Our priority is to protect consumers from undue price volatility while ensuring a stable and reliable power supply,” Juan said. “Preparedness remains important given the Philippines’ exposure to global energy markets.”
