Policy Note

From Reactionary to Ready: A Review of the 2026 WESM Market Suspension

The 2026 Middle East conflict involving the United States, Israel, and Iran has left the Strait of Hormuz effectively closed. This has disrupted 20% of the global oil supply passing through this waterway and exposed the structural fragility of the Philippines’ dependence on imported oil and liquified natural gas (LNG), 98% of which comes from the Middle East. In an attempt to mitigate the potential impacts of the crisis, the Department of Energy (DOE) recommended the implementation of measures intended to soften these potential impacts. This policy note primarily deals with the suspension of trading in the Wholesale Electricity Spot Market (WESM) and the implementation of administered pricing in lieu of normal market-clearing prices. This policy note argues that the effects of these policies have produced counterintuitive results: absolute power generation from oil and LNG increased by 20% during the suspension period, thereby failing to achieve the primary goal of fuel conservation.

Additionally, this policy note identifies the following observations resulting from the implementation of the WESM suspension and administered pricing: deviations from set rules and precedent, uncertainty on market resumption, the existence of political override risk, and synthetic line rental hikes for bilateral contracts. These observations imply that the measures implemented were largely reactionary. To make the analysis more holistic, this policy note also explores similarities and differences in market suspension rules and regulations in Singapore, Australia, and Ontario, Canada relative to the design and structure of the local WESM.

Drawing on this comparison, this policy note recommends transitioning from a reactionary stance to a more resilient and ready regulatory framework by: implementing a Last Good Price pricing mechanism similar to that used in Ontario, Canada, issuing pre-determined guardrails for market resumption, providing a clearer delineation of responsibilities and accountabilities among political departments, pursuing further legislation to incorporate alternative physical market-stabilization mechanisms similar to those employed in Singapore, and integrating crisis-response measures with existing and proposed Just Transition policies. Incorporating these recommendations would help shift the narrative from a reactionary to a more proactive one.