A reliable source of electricity is needed to ensure competitiveness and development of countries, particularly—developing countries. Philippines experienced a series of outages for the last 20 years and brought a huge stir in the economy. With the country’s rapid growth, how will the country able to address the potential effect of a shutdown? What is the economic impact of a power shortage in the country? Hence this paper aims to provide a theoretical and numerical analysis of electricity shortages and provide a framework for future extensions. Mainly , this paper contributes to literature the welfare analysis of power shortages, whereas undistorted market serves as the benchmark case. Results showed that there is a big impact brought by power shortages, derived from an increase in the electricity price both in the competitive and monopoly market. Overall, this study suggests for the government to implement effective policies and adjustment strategies to deal with power shortages in the shortrun. Moreover, the government can focus on improving the utilization rate of installed power plants and maintenance of the aging ones. Further studies should be done on electricity pricing and other areas of the electricity industry.