Energy Regulatory Commission (ERC) chair Francis Saturnino Juan said Monday that any proposal to introduce electricity hedging in the country must be carefully studied to ensure it delivers benefits to both investors and end-users.

In an interview on the sidelines of the “Preventing Bill Shock” roundtable at the PSE Building in Bonifacio Global City in Taguig City, Juan said any new service in the power sector must comply with existing policies and laws.
 

He noted that in other countries, electricity hedging typically involves derivatives such as forward contracts tied to wholesale and spot market prices.
 

However, Juan said hedging is not currently among the options available to distribution utilities (DUs) to secure supply, as only power supply agreements (PSAs) are permitted, subject to ERC approval.

“We're getting the impression that these forward contracts are financial contracts and they're not actually physical or bilateral supply contracts as per use in Section 45 (of the Electric Power Industry Reform Act of 2001). So, if these are not, will they still be submitted to ERC?” he said.
 

Juan also pointed to risks, including the possibility that prices could fall after DUs or electric cooperatives (ECs) lock in agreements.
 

He said electricity prices are currently influenced by factors such as fuel costs, bilateral contracts, and weather- and demand-related conditions.
 

He added that the ERC will study all these considerations, as regulators are “keen on exploring every available mechanism that will ultimately redound to the benefit of the consumers.”