The Energy Regulatory Commission (ERC) has formally approved the implementing rules governing the Department of Energy’s Mid-Merit Natural Gas Capacity Auction Program, while also opening for public consultation a new secondary price cap designed to rein in excessive costs in the country’s reserve and ancillary services market.
Approval of the Gas Auction Implementing Rules (GAIR) establishes a clear price ceiling known as the Gas Auction Threshold (GAT) Price—the maximum bid allowed, with any offer above it automatically rejected—alongside fuel cost benchmarks, audit requirements, and payment protocols through the Wholesale Electricity Spot Market (WESM). These rules set clear boundaries: the GAT Price covers plant construction, financing, operation, maintenance, taxes and reasonable returns, while fuel costs are recovered separately each month at actual but capped against published benchmarks. ERC Chairperson Francis Saturnino Juan noted the action fulfills the commission’s mandate under the Electric Power Industry Reform Act (EPIRA), ensuring prices remain fair, costs are properly verified, and payments are made only for power actually delivered. The rules take effect once published, while preliminary GAT prices remain open for public comment until November 13, 2026, with a public consultation scheduled for November 20, 2026.
In a separate development, the ERC has released for public discussion a proposal to introduce a Secondary Price Cap (SPC) in the WESM Reserve and Ancillary Service Market. Acting like a circuit breaker, the mechanism would track three-day rolling average prices; if averages exceed set trigger points, prices are capped at predefined levels for each reserve type, applied separately across Luzon, Visayas and Mindanao. Proposed trigger and cap rates range from P7,830.07 per MWh capped at P3,216 per MWh for dispatchable reserve, to P16,104.75 per MWh capped at P14,548 per MWh for regulating down reserve. Testing against recent market data shows the cap would have lowered average prices by 12% to 50% in the Visayas and 17% to 33% in Mindanao, while leaving Luzon unaffected since its prices stayed below trigger levels. The safeguard is intended to protect consumers from unexpected price spikes while supporting a more stable competitive market structure when the reserve market resumes operations.
