Brace for the Summer of ’26

From all indications, it looks like we are in for a summer to remember.

The months of March to June (or even July) have always been precarious for the power sector in the country. This is often called the “colorful” season, one that is marked by red and yellow alerts indicating the level of supply margin (or lack thereof) in the grid. It can also be the “black” season when temperature rises above the forecast and demand soars leading to power outages in some areas of the country. Such outages would occur on a regular or rotating basis due to lack or insufficiency of the power supply or the unavailability of fuel, especially in off-grid areas where more than 90% of power generation still comes from diesel or bunker fuel-fired generators. When the private power producers use up all their fuel inventory, or the National Power Corp. runs out of funds to purchase fuel, the islands go dark until new fuel deliveries arrive.

WHAT THE DATA TELLS US ABOUT SUMMERS-AS-PER-USUAL
Based on data from the Department of Energy (DoE) and the Independent Electricity Market Operator of the Philippines (IEMOP), the operator of the wholesale electricity spot market (WESM), there has been a steady increase in the supply margin (the difference between available generation and demand) in the country from 2023 to 2025, more importantly during the high temperature months of March until August. It is, therefore, noticeable that after the unusually high temperatures during the El Niño year of 2024, resulting in more than almost 100 hours of red alert and more than 330 hours of yellow alert (cumulative for Luzon, Visayas, and Mindanao), there were no red alerts and around 16 hours only of yellow alerts declared in 2025.

In terms of pricing, consumers are always advised to prepare for price increases during the high temperature-high demand summer months. Data from the IEMOP and from the websites of Distribution Utilities (DUs), as processed by the analysts of the Institute of Climate and Sustainable Cities (ICSC), showed a general divergence between the WESM prices and the generation costs that end up being charged by DUs to customers. In some instances, for some DU customers, the difference between the WESM price and the DU charges could be as much as P4 to P5 per kilowatt-hour. The figure in Table 1 shows the generation costs charged in 2023-2025 by the three largest private DUs in the country — Meralco in Luzon, Visayan Electric in Visayas, and Davao Light and Power in Mindanao — as against the average WESM prices for the same period.

WHAT IS DIFFERENT FOR THE SUMMER OF ’26
As of March 12, data from the system operator, the National Grid Corp. of the Philippines (NGCP), showed a healthy supply margin (see Table 1).

The weather service, PAGASA, has also reported that neutral (neither El Niño or La Niña) conditions are expected for the months of June-August, so there appears to be no reason to expect an unusual spike in demand without the occurrence of unusually high temperatures.

Without the conflict in the Middle East, therefore, we would have been in a very secure and comfortable position in terms of the power supply for the summer of 2026.

In terms of pricing, considering that DU generation costs are predominantly dependent on the contracted supply instead of WESM prices, the trend established toward the end of 2025 would have continued for 2026 or for the duration of the power supply agreements. With the increasing price of fuel, particularly liquefied natural gas (LNG), and the indirect effect on the price of coal, we should also prepare ourselves for the impact of these rising costs for the near term.

BRACING FOR IMPACT
There is no doubt that we need to brace ourselves for very turbulent times. While it may feel like we are fully exposed and unprepared as this crisis lands upon us, we need to keep our focus and recall what we need to do whenever there is a sudden drop in altitude or when we encounter severe turbulence in our journey.

1. Seatbelts on, life vests ready. Just as in long journeys by air, land, or water, there are protective gear or equipment in place that must be used or activated to prevent injury or death in case accidents happen. In the economic system — or at least in the power sector — there are also guardrails that have been set up in law, regulations, and contracts. We need to use and activate them for the purposes for which these are intended.

DoE policies governing the scheduled maintenance outages for generation plants should be strictly observed, and violations should be penalized quickly and appropriately to underscore the consequences of non-compliance. Observance of the DoE rules on the maintenance of 60-day fuel inventory for coal plants should be closely monitored not only to secure continuity in power supply, but also to ensure faithful recording of pricing of deliveries given the volatility in global coal prices.

There are also rules in the WESM prohibiting and penalizing the physical and economic withholding of capacities by power generators. On previous occasions, the Philippine Electricity Market Corp. (PEMC) — as the governance arm of the market — has conducted investigations based on observations by the Market Surveillance Committee of certain behavior that could amount to withholding of capacities and violation of the Must Offer Rule requiring all generation facilities to offer their available capacity to the market for scheduling and dispatch.

The results of DoE’s monitoring of compliance with the Grid Operating and Maintenance Program (GOMP) as well as those of PEMC’s investigations on compliance with the Must Offer Rule should be studied and reported.

ERC’s orders and decisions approving Power Supply Agreements (PSAs) entered into by DUs and generator-suppliers, particularly for supply coming from coal, oil, and natural gas plants, also have consumer protection mechanisms which are useful in ordinary times, but more important during times of volatile pricing or perilous fuel supply situations. Since 2022, following the temporary ban on coal exports imposed by Indonesia and the onset of the war in Ukraine that disrupted the global supply chain for petroleum products, the PSA approvals have included conditions for the submission of coal and LNG supply contracts so that the ERC can verify the terms, particularly pricing conditions that are passed on to consumers.

2. Put on your own oxygen masks first. The current situation puts a spotlight on this ongoing shift of strategies among States, from global trade based on multilateral agreements to one of reconfigured trading blocs or bilateral ties to secure one’s needs above all else.

In the local scene and in a smaller scale, we see a version of this happening among electricity end-users in the Philippines. I call this “the imperative to self-provide.” It has been building up for some time now: first, among the generation companies choosing to build and spend for their own dedicated transmission facilities to connect their power plants to the grid given the challenges and delays in grid expansion and connection; then, among consumers choosing to install or put up their own diesel generators or solar home systems to secure their power supply in areas where the DU service is unreliable, or to lower their electricity costs in areas where the DU generation charges are too high. Based on ERC records, as of March, there are now more than 22,200 customers all over the country producing their own power from the sun for their own needs, realizing savings from power bills and exporting their excess power to support the supply requirements of the system under the Net Metering Program. In fact, the number of new registrations of Net Metering customers has steadily increased by at least 100% every year since 2021 to the end of 2025.

Solar providers have also responded positively to this indisputable interest among consumers to self-provide. There are now more solar home system providers offering deferred payment facilities for solar installation, some without requiring any downpayments.

More recently, consumers who cannot self-provide physically are self-defining financially. They now source their power supply directly with more reasonable generation rates (on the average, at least P2/kilowatt-hour (kWh) cheaper than DU-supplied generation) by forming their own “trading bloc,” so to speak, via the Retail Aggregation Program (RAP). Through RAP, smaller consumers (households, MSMEs, schools, churches) can consolidate demand, choose their own supplier, and negotiate their own rate under the Retail Competition and Open Access (RCOA) system pursuant to the Electric Power Industry Reform Act (EPIRA) of 2001. Consumers can practically go shopping for the lowest rates based on the quarterly report that ERC publishes on the retail market at https://buyyourelectricity.erc.ph/. As of December 2025, the ERC reported the average prices by the respective suppliers (see Figure 2).

3. Be careful when you open the overhead bins because articles may have shifted during flight. In these volatile times, one should always remain alert about the changing conditions. Government agencies may not have all the solutions needed for unprecedented situations, but by adhering to principles of transparency and providing access to relevant information they already equip stakeholders with some tools needed to craft solutions. There is real value to open discussions and regular communication during a crisis. It is an exercise of trust-building that allows government to mobilize private sector resources when needed to augment limited public funds. More importantly, the predictability alone of these engagements and flow of information provide an anchor that steadies the ship until land is clearly in sight.

Monalisa C. Dimalanta is a senior partner at Puyat Jacinto & Santos Law (PJS Law). She was the chairperson and CEO of the Energy Regulatory Commission from 2022 to 2025, and chairperson of the National Renewable Energy Board from 2019 to 2021.