ELECTRICITY prices in the Philippines’ spot market could increase by as much as P4 per kilowatt-hour (kWh) next month, driven by the ongoing Middle East conflict and higher summer demand, according to the Energy Regulatory Commission (ERC). ERC Chairman and CEO Francis Saturnino Juan warned that if the global oil crisis continues, the cost of electricity sourced from oil-powered plants could significantly impact consumer bills, especially during the dry season when demand peaks.
Juan explained that the potential increase of P2 to P4 per kWh would be a consequence of the marginal plants operating on oil, which tend to submit higher offers when oil prices rise. This scenario is based on simulations conducted by the Independent Electricity Market Operator of the Philippines, which manages the Wholesale Electricity Spot Market (WESM). The simulations account for current global oil prices and projected demand increases, highlighting the vulnerability of the country’s power prices to external shocks.
If the upper estimate of P4 per kWh is realized, it would more than double the average system-wide WESM price of P3.50 per kWh recorded in February. However, Juan clarified that this increase in WESM prices would not automatically translate to higher power generation charges for consumers. He emphasized that the impact depends on how much power utilities, such as Meralco, are exposed to WESM prices, as their level of exposure varies and influences how much of the spot market prices are passed on to consumers.
The recent surge in fuel prices in the Philippines is linked to the geopolitical tensions in the Middle East, particularly the US-Israel conflict with Iran that erupted in late February. Disruptions in oil and gas shipments through the Strait of Hormuz have caused supply shortages, leading to a spike in fuel costs. These developments threaten to further drive up electricity prices, underscoring the Philippines’ vulnerability to international geopolitical and economic fluctuations that affect energy costs and, ultimately, consumer power bills.
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