Power: El Niño tightens supply, lifts price upside
DOE warned that a prolonged El Niño could raise the risk of power interruptions and higher electricity bills as extreme heat strains thermal plants and lower water availability weighs on hydro generation.
El Niño's arrival is tightening power supplies and driving up electricity prices, according to the Philippines' energy regulator. The Department of Energy warns that a prolonged El Niño could increase the risk of power outages and higher bills, as extreme heat stresses thermal plants and reduced water availability limits hydro generation. This week, WESM (Western Electricity Supply Management) prices in the Visayas and Mindanao regions reached nearly P20 per kilowatt-hour during August.
The tighter supply creates an advantage for independent power producers (gencos), as reduced availability boosts pricing. As El Niño intensifies, hotter weather is expected to boost electricity demand, potentially accelerating the recovery of DER (distributed energy resources) volume. However, plant availability remains a key variable that could impact availability and hydro output.
The main risk to the price upside is regulatory intervention if sustained WESM spikes prompt tighter market controls. Among the stocks to consider, AB Capital Securities recommends AP (Aboitiz Power) as the cleanest play to capitalize on higher power prices. ACEN (Aboitiz Concrete) presents tactical upside, but with less earnings visibility.
MER (Meralco) and SCC (San Miguel) also offer earnings upside from the current market setup, albeit with ongoing regulatory concerns that may continue to constrain their future valuations.
Written by urgent.news from Philippine Star Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
