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The Philippines experienced a series of outages in the 1990s that made a great impact on the economy. With the country’s current rapid growth and development, what will be the potential economic impact of a power shortage in the country? This paper aims to provide a theoretical and numerical analysis of power plant shutdowns that might cause electricity shortages. By using an undistorted market as the benchmark case, this research focuses on the welfare analysis of power shortages. The study investigates and focuses on the shutdown in November to December 2013. The cases of the 1990s Power Crisis and the Mindanao Power crisis are also included in the analysis. The presence of quantity rationing is also investigated in so much as how the government regulates the prices when there is a shortage. Results show that the occurrence of shutdowns caused by the increase in the generation prices made a big impact on the Philippine economy. Quantity rationing led to a large decrease in the total surplus, due to the decline in the consumers’ welfare brought about by the shortage and prices pegged at a certain level. This study recommends that the government implement effective policies and adjustment strategies to deal with power shortages in the short run. Moreover, the government should also focus on improving the utilization rate of installed power plants and maintaining the operations of those aging ones. It is recommended that further studies be done on electricity pricing and other areas of the electricity industry. The study also provides a framework for future extensions.

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