Electricity spot market prices rose sharply in the Visayas and Mindanao during the August 2026 billing period as generating-unit outages, tighter regional supply margins and transmission constraints increased reliance on higher-cost generation. For the billing period covering 26 July to 25 August 2026, the average market price in the Visayas increased to PHP18.59/kWh from PHP11.29/kWh in July, while the Mindanao price increased to PHP19.56/kWh from PHP10.39/kWh. The supply margin of Visayas and Mindanao declined by 190 MW and 253 MW, respectively, influenced by outage levels, supply constraints relative to demand, grid alert conditions, and changes in HVDC power flows.
In contrast, the average price in Luzon declined to PHP4.80/kWh from PHP7.30/kWh as demand decreased substantially and sufficient generation remained available despite several generating-unit outages and records a 632 MW increase in the supply margin.
At the system-wide level, average supply declined by 4.1% to 19,739 megawatts (MW), while average demand fell by a larger 6.7% to 13,939 MW. As demand declined faster than supply, the average system-wide supply margin increased to 3,779 MW from 3,590 MW in July. Despite the relatively comfortable national supply margin, conditions differed significantly across the three grids.
Visayas experienced the tightest supply conditions
The Visayas experienced particularly tight supply conditions during the billing period. Average available supply declined by 2.6% to 2,201 MW while demand increased slightly to 2,094 MW. After considering reserve requirements and inter-regional transfers, the average Visayas supply margin declined from 252 MW in July to only 62 MW in August.
Generation deficiencies were aggravated by forced outages affecting generating facilities in the region. The System Operator declared a total of 86 hours of Yellow Alert and 53 hours of Red Alert in the Visayas during the August billing period. During qualifying market-intervention intervals arising from generation deficiencies, administered pricing was applied in accordance with the WESM Rules. These conditions resulted in significantly higher regional prices, with sub-regional average prices ranging from PHP18.44/kWh in Leyte-Samar to PHP18.71/kWh in Cebu.
Mindanao supply margin also tightened sharply
Mindanao similarly experienced tighter supply conditions during August. Average available supply declined by 7.3% to 3,045 MW while average demand increased by 5.0% to 2,195 MW. Its average supply margin consequently fell from 570 MW in July to 317 MW in August. Generating-unit outages, higher demand and tighter supply conditions increased the need for higher-cost generating resources, contributing to the increase in Mindanao’s average market price to PHP19.56/kWh.
Unlike the Luzon-Visayas interconnection, operating conditions on the Mindanao-Visayas HVDC improved during the month. Periods without price separation increased to 91.2% from 73.1% in July, while free-flow transfers from Mindanao toward Visayas accounted for approximately 89.3% of the billing period. This allowed Mindanao generation to provide substantial support to the Visayas. However, the corresponding exports occurred while Mindanao itself was experiencing reduced local supply availability and increasing demand.
Forced outages and transmission constraints limited access to additional lower-cost supply
The tight supply situation due to forced outages in Visayas was compounded by constraints affecting the Luzon-Visayas High Voltage Direct Current or HVDC interconnection. Conditions associated with price separation between Luzon and the Visayas occurred during 85.9% of the August billing period, substantially higher than 46.4% in July. The interconnection operated at security-limited levels for approximately 80.3% of the period.
Although lower-priced Luzon generation continued to supply part of Visayas demand, high transfers increased loading on the Leyte-Cebu interconnection transmission facilities. Transfer limits were therefore necessary to maintain grid security. These limitations reduced the amount of additional lower-cost Luzon generation that could reach the Visayas, resulting in greater dependence on available local generation, including higher-cost oil-based and battery resources during tight operating conditions.
“August showed how regional conditions can differ significantly from the national supply picture. While Luzon maintained adequate supply margins, the Visayas experienced generation deficiencies due to forced outages, tighter supply margins, and transmission constraints that limited access to additional lower-cost power. These conditions increased reliance on higher-cost oil-based plants and battery resources to meet demand, pushing market prices significantly higher,” IEMOP said.
Pricing Mitigation Measures Applied amid Tight Market Conditions
Several WESM pricing mechanisms were applied during the August 2026 billing period as the market experienced generation deficiencies, transmission constraints, and sustained high prices, particularly in the Visayas and Mindanao.
In the Visayas, Administered Pricing (AP) was applied during market-intervention intervals arising from generation deficiencies that necessitated the implementation of the Market Load Drop mechanism. AP conditions accounted for about 10.07% of trading intervals, while no market intervention events were recorded in Luzon and Mindanao. Price Substitution Methodology (PSM) was also applied in about 2% of trading intervals across the three grids due mainly to network congestion and extreme price separation among trading nodes.
The sustained high prices in Visayas and Mindanao also resulted in the application of the Secondary Price Cap (SPC) during some trading intervals. The SPC is a WESM price-mitigation mechanism designed to limit prolonged exposure to high spot market prices once the prescribed cumulative price threshold is reached. SPC conditions accounted for approximately 2.02% of intervals in Luzon, 4.45% in the Visayas, and 5.09% in Mindanao.
Despite the significantly higher prices in the Visayas and Mindanao, however, the SPC was applied only during limited intervals. Electricity continued to flow through the interconnections linking the three grids, particularly the Luzon-Visayas HVDC link. Under the applicable methodology, the lower prices in Luzon therefore moderated the combined price measure used in determining whether the cumulative price threshold had been reached. As a result, sustained high regional prices in the Visayas and Mindanao did not always translate into an SPC trigger at the combined-system level.
Normal pricing conditions nevertheless remained the predominant condition during the billing period, accounting for approximately 66.15% of intervals in Luzon, 63.24% in the Visayas, and 63.28% in Mindanao.
Pricing Error Notice (PEN) conditions were also recorded during the period, accounting for 29.68%, 20.14%, and 29.49% of intervals in Luzon, Visayas, and Mindanao, respectively. These were mainly associated with extreme price outcomes involving Constraint Violation Coefficients that required market reruns and price recalculations.
Overall, the occurrence of administered pricing, price substitution, Secondary Price Cap conditions, and pricing reruns reflected the unusually tight regional supply conditions, generation deficiencies in the Visayas, and continuing transmission constraints experienced during August.
Renewable Energy Share Increased
Renewable energy accounted for approximately 25% of total generation in August, higher than 22% in July. Hydropower, remaining as the largest RE contributor, increased from 6.3% to 9.5% of total generation; geothermal increased from 7.5% to 8.2%, and wind increased from 0.5% to 1.2%. Meanwhile, coal remained the largest generation source at 56.0%, although its share declined from 59.1% in July. Oil-based increased from 1.4% to 2.4% while natural gas slightly decreased from 17% to 16%. Solar generation decreased from 6.9% to 5.5%, while biomass remained stable at 1.0%. For Battery Energy Storage Systems (BESS) and Pumped Storage Hydro (PSH), these maintained a stable share of 0.02% and 0.7% of total generation, respectively.
Customer exposure to spot prices varies
Spot-market transactions accounted for approximately 13.4% of total metered energy during the August billing period, while bilateral contracts represented about 86.6% on a system-wide basis. However, the actual mix of supply differs among distribution utilities (DUs), electric cooperatives (ECs), retail suppliers, and other market customers. Some participants obtain a larger share of their requirements through bilateral supply contracts, while others rely more heavily on purchases from the WESM spot market. This means an increase in WESM spot prices does not automatically result in the same increase in the electricity bills of all consumers. The actual impact on a particular DU, EC, supplier, or customer will depend largely on its own mix of bilateral contracts and spot-market purchases, together with other applicable generation and regulated charges.
Higher spot market prices nevertheless increased the Effective Spot Settlement Price and total spot-market trading amounts during the month.
Reserve/Ancillary Services Market
In the reserve market, reserve prices in Luzon decreased across all reserve categories. Regulation Down and Regulation Up Reserve prices declined by 12.17% and 19.02%, respectively, despite market requirements and scheduled quantities remaining fully met at 195 MW. Contingency Reserve prices posted the largest decline at 56.37%, while Dispatchable Reserve prices fell by 50.31%. The decreases were accompanied by lower August 2026 zonal prices across all reserve products compared to the previous billing period. Overall, the decrease in reserve market prices reflects softer reserve market settlement prices during the billing period.
In the Visayas, reserve price movements varied. Regulation Down and Regulation Up Reserve prices slightly dropped by 0.95% and 2.84%, respectively, as market requirements and scheduled quantities remained relatively stable. In contrast, Contingency Reserve prices increased by 47.46%, while Dispatchable Reserve prices rose by 26.06%. These increases coincided with Contingency and Dispatchable Reserve requirements of 131 MW and 105 MW, respectively, and lower scheduled quantities relative to requirements. Overall, reserve market outcomes varied across reserve categories, reflecting differing supply and scheduling conditions during the billing period.
In Mindanao, reserve price movements were also varied. Regulation Down Reserve prices marginally increased by 2.38%, while Regulation Up Reserve prices declined by 17.44%. Meanwhile, Contingency Reserve prices surged by 90.67%, and Dispatchable Reserve prices had the largest increase among all reserve types, rising by 1,070.57% from PHP 0.29959/kWh to PHP 3.50691/kWh. These increases occurred despite available supply remaining well above reserve requirements. Overall, the sharp rise in Contingency and Dispatchable Reserve prices highlights tighter market conditions for these reserve categories during the billing period.
