Reliability standards establish the level of performance expected from generating units and provide incentives for generation companies to maintain their facilities, minimize unplanned outages, and make timely investments. Their purpose should be to drive continuous improvement in generation performance. Standards should not simply accommodate persistent operational shortcomings; they should also reflect the reliability that the power system requires and consumers should reasonably expect.

This principle is particularly relevant to Resolution No. 23, Series of 2026 of the Energy Regulatory Commission (ERC), which revises the Reliability Performance Indices and Equivalent Unplanned Outage Days Per Year for generating units. While the revised framework introduces important measures to strengthen outage reporting, maintenance planning, transparency, and regulatory oversight, one key feature raises a fundamental concern: by substantially increasing allowable unplanned outage days, do the revised thresholds provide sufficient incentives for generating companies to improve reliability, or do they risk normalizing past underperformance?

Published
09 September 2026

Relaxing Outage Allowances Risks Normalizing Poor Performance

As shown below, the allowable equivalent unplanned outage days under the new resolution have increased significantly across several major generation technologies. In some cases, they are nearly double the previous limits set under Resolution No. 10, Series of 2020.

Different technologies naturally have distinct operating characteristics and require specific benchmarks. The concern is not that every technology should share the same threshold but whether substantially higher allowances risk normalizing levels of unplanned outages that should instead be reduced through operational discipline.

The ERC explains that these revised thresholds are based on actual operating and outage data from 2015 to 2024. While historical data are essential for understanding fleet performance and identifying reliability gaps, past performance should inform regulatory standards—not determine the level of reliability expected in the future.

Where historical operating data reveal recurring forced outages, the appropriate regulatory response is to address their underlying causes through preventive maintenance, improved operations, timely capital investments, and strict accountability. By increasing allowable outage days to mirror historical underperformance, the revised rules risk turning persistent operational deficiencies into an accepted regulatory benchmark. If a generation fleet has experienced recurring outages, using that same performance to set higher outage allowances effectively institutionalizes the reliability problems that regulation should be solving.

This statement does not mean that regulatory standards should ignore actual operating conditions and technical constraints. It emphasizes that technology-specific characteristics and system conditions should define a clear pathway toward improved performance rather than become a basis for accepting avoidable reliability problems.

A Performance-Based Reliability Framework

To prevent past underperformance from becoming the default regulatory standard, the ERC should adopt a forward-looking, performance-based reliability framework that links reliability standards to system requirements, generator performance, and regulatory action.

Reliability thresholds should be reviewed periodically based on system needs, operating conditions, technical capabilities, and demonstrated improvements in generation performance, with standards becoming progressively more demanding where sustained improvements are achieved.

Generator performance should be assessed using transparent and verifiable data, with persistent deviations from reliability standards triggering regulatory review and, where appropriate, corrective measures. Technology-specific standards should recognize legitimate differences in operating characteristics without allowing these differences to justify avoidable or persistent reliability problems.

The objectives should be clear: better plant availability, fewer unplanned outages, and a more dependable electricity supply.

A Performance-Based Approach

A better framework should link system loss targets, utility performance, and cost recovery.

System loss targets should be based on network characteristics, historical performance, operating conditions, and relevant benchmarks. They should be transparent and periodically reviewed so that they remain realistic while encouraging continuous improvement.

Utility performance should then be measured against these targets using clear, verifiable indicators. Regulators should be able to determine whether a utility has taken reasonable steps to reduce losses, whether its performance is improving, and whether claimed costs are efficiently incurred.

Cost recovery should follow performance. Consumers should bear only the system loss costs that are consistent with prudent and efficient operations. Persistent underperformance, weak loss prevention efforts, or failure to address preventable losses should not automatically result in recoverable charges.

This approach provides stronger incentives for utilities to improve while protecting consumers from costs they should not have to bear. It also gives regulators a more objective basis for determining what costs are recoverable.

System-Wide Consequences and the Unfair Burden on Consumers

The importance of strong, enforceable reliability standards extends far beyond individual power plant performance. Recent operational conditions across the Philippine power system demonstrate how the sudden forced outage of a single large generating unit creates a cascading effect across the entire electricity grid.

Over the past year, the system operator has repeatedly issued yellow and red alerts across the Luzon and Visayas grids. Unplanned forced outages, particularly from coal-fired power plants, have consistently depleted available operating reserves. When these large and centralized generating units unexpectedly go offline during tight supply conditions, the loss of capacity immediately strains the remaining generation fleet and forces grid operators to dispatch expensive replacement power.

This vulnerability is particularly acute in the Philippines’ historically centralized and baseload-oriented electricity system, where large generating units provide a substantial share of total power supply. In such a system, unscheduled outages reduce frequency control and operational margins, increasing the risk of rotating power interruptions while triggering price spikes in the Wholesale Electricity Spot Market (WESM).

Ultimately, generation reliability must be evaluated through a systemic lens because these grid-level failures directly translate into economic harm for end-users. Consumers should not bear the cost of preventable underperformance. Consumers have no control over plant maintenance, investment, or daily operations, but they bear the financial burden of persistent underperformance through higher power bills, market volatility, and frequent service interruptions.

Reliability standards exist primarily to protect consumers, not the regulated industry. The party best positioned to prevent avoidable outages must have a strong regulatory incentive to do so, rather than passing the resulting costs and operational risks down to Filipino consumers.

Building Resilience Through Power System Diversification

Enforcing strict generation reliability standards must go hand-in-hand with the broader diversification and modernization of the Philippine power grid.

As the country’s electricity system has historically relied heavily on large, centralized baseload power plants, the entire grid remains acutely vulnerable to single-point generation failures. As electricity demand grows and the energy transition progresses, accelerating the deployment of distributed renewable energy, rooftop solar, battery energy storage, and flexible generation resources will provide crucial supply buffers and enhanced system flexibility.

Distributed resources reduce total system dependence on individual large plant outages by increasing the number and geographic distribution of electricity sources. For instance, rooftop solar generates power directly at the point of consumption. When properly integrated through updated interconnection standards, net metering, distribution planning, and energy storage, these resources build a more resilient grid. Transforming the power system requires a two-pronged strategy: holding existing thermal generation to strict performance standards while actively building long-term resilience through clean energy diversification.

A Broader Consumer Perspective

System loss reform should be part of a broader effort to make electricity more affordable. Generation costs, fuel prices, transmission charges, taxes, procurement practices, market rules, and other regulatory policies affect the final electricity bill. Removing or reducing system loss charges alone is insufficient to resolve the structural causes of high electricity prices.

Consumers also have a role in improving the efficiency of the electricity system. Households and businesses should practice energy conservation and efficiency and, where eligible, utilize programs such as net metering, retail competition and open access, retail aggregation, and time-of-use pricing.

Consumers can also help utilities address nontechnical losses by reporting electricity pilferage, illegal connections, meter tampering, and other forms of unauthorized consumption. A vigilant and informed consumer base can complement utility efforts and strengthen accountability.

Efficient electricity service has other benefits aside from reducing household budgets. Lower power costs could improve the country’s business competitiveness, investor appeal, job creation, and industrialization.

The Path Forward

Strengthening reliability standards provides a vital opportunity to improve generation performance, protect consumers, and build a more resilient electricity system. While ICSC supports the ERC’s initiatives to strengthen outage reporting, mandate public performance disclosures, and enforce administrative sanctions, the regulatory framework should implement the following targeted actions:

1. Establish progressively stronger reliability standards

The revised thresholds under Resolution No. 23, Series of 2026 should serve only as temporary transitional benchmarks. The ERC must establish a clear, transparent mechanism for periodically reviewing and tightening allowable outage days over time as plant performance improves and system requirements evolve.

2. Use historical data to address gaps, not adjust standards

Historical operating and outage data should be used to diagnose recurring operational failures and identify fleet vulnerabilities. Persistent underperformance must trigger targeted regulatory intervention and corrective investment rather than lead to relaxed, permissive standards.

3. Strengthen oversight, transparency, and accountability

Reliability performance must be consistently monitored, publicly disclosed, and made fully accessible to consumers and stakeholders. The ERC must establish clear reporting mechanisms that evaluate generation performance while accounting for legitimate technical differences among technologies. Crucially, persistent or excessive unplanned outages must trigger mandatory regulatory oversight, including strengthened maintenance requirements, performance improvement plans, and corrective audits rather than routine benchmark adjustments.

4. Evaluate system-wide impacts of generation outages

Reliability assessments must look beyond isolated plant logs to evaluate the compounding effects of unplanned outages, specifically their timing during tight grid conditions and their direct impact on supply adequacy, WESM price spikes, and consumer generation charges.

5. Complement stronger standards with system diversification

Efforts to improve existing generation should complement policies that expand distributed renewable energy, rooftop solar, energy storage, and other flexible resources. Diversifying where and how electricity is generated can reduce dependence on individual large generating units and strengthen overall system resilience.

A reliable electricity system requires strong performance from individual generating units and resilience across the system as a whole. Therefore, reliability standards should establish a clear pathway toward improved generation performance while supporting the country’s transition toward a more diversified and decentralized power system.