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Electricity consumers in the Visayas are expected to see lower power rates after the Energy Regulatory Commission (ERC) ordered the suspension and correction of excessive Line Loss and Congestion Cost (LLCC) charges that were traced to a flaw in the Wholesale Electricity Spot Market (WESM) pricing system.
“We expect to see lower power rates in the Visayas, and refunds to consumers who saw their electricity bills surge by anywhere from ₱2 to ₱5.99 per kilowatt-hour because of the erroneous pass-on of excessive LLCC charges,” House Minority Leader and 4Ps Party-list Rep. Marcelino “Nonoy” Libanan said.
The ERC issued its corrective order on Aug. 13, two days after Libanan raised the issue during a House Committee on Energy hearing attended by officials of the commission and the Department of Energy.
The lawmaker’s intervention followed an appeal from the Eastern Samar Electric Cooperative Inc. (ESAMELCO), which reported rapidly rising LLCC charges being passed through WESM. The cooperative said the charges had become a significant burden on consumers in Eastern Visayas.
Based on ESAMELCO estimates, excessive LLCC charges passed on to consumers in Region 8 had reached about ₱1.55 billion since January.
Pricing Flaw
LLCC, which the ERC also refers to as “line rental,” is intended to account for electricity lost while being transmitted and for additional costs arising when transmission lines become congested and prevent lower-cost electricity from reaching another area.
The ERC, however, found that the unusually high charges were not primarily caused by the formula used to distribute market surpluses. Instead, the problem was traced to the WESM pricing model and its dispatch optimization system when high-voltage direct current (HVDC) interconnections linking Luzon, Visayas, and Mindanao reached their transmission limits.
ERC Chairperson Francis Saturnino Juan said the system failed to properly record the bottleneck created by transmission constraints. Instead, it generated separate baseline System Marginal Prices for affected regions, distorting the calculation of line rental charges and market settlements.
Market data cited by the ERC illustrated the effect. On July 26, 2026, the System Marginal Price in Luzon and Visayas reached ₱6,551.52 per megawatt-hour, compared with ₱3,457.47 per MWh in Mindanao because of constraints on the Visayas-Mindanao HVDC link.
In another interval that day, the SMP in Luzon stood at ₱6,544.95 per MWh while the Visayas price climbed to ₱14,485.78 per MWh.
According to the ERC, the pricing flaw inflated line rental charges and resulted in net settlement surplus allocations going to market participants that were not affected by the congestion, while consumers in the higher-priced Visayas region bore the additional cost.
Long-Term Correction
The ERC ordered the Independent Electricity Market Operator of the Philippines (IEMOP) to temporarily suspend the collection or payment of Line Rental Trading Amounts when different electricity prices arise because of constraints at HVDC interconnections or between pricing regions.
IEMOP has about 30 days to implement the rule. Any resulting funding gaps will be charged directly to customers in the higher-priced region based on their electricity usage.
The commission also directed the adoption of a revised pricing methodology that will separate nodal prices into the System Marginal Price, cost of losses, and cost of congestion when cross-regional price differences occur.
The measure is intended to ensure that congestion costs are properly reflected without changing the existing market pricing formula.
IEMOP must also upgrade its Market Dispatch Optimization Model and Central Registration and Settlement System to incorporate the technical corrections.
The ERC also ordered an independent audit of the market’s Net Settlement Surplus and Net Settlement Deficit allocations dating back to June 26, 2021.
Possible Refunds
The audit could determine whether consumers and other market participants were overcharged and identify the adjustments that must be made.
IEMOP has been directed to submit a methodology and timetable for implementing refunds or collecting adjustments arising from the audit. The regulator said these adjustments may be spread across several billing periods.
For Libanan, the prospect of refunds is an important part of the ERC action, particularly for consumers who absorbed what he described as excessive charges.
“Consumers should not be made to shoulder the cost of the electricity market’s defective pricing and settlement system. If consumers were overcharged, they deserve to get their money back,” he said.
IEMOP will also update the WESM market manual and file a separate application with the ERC to recover expenses related to the required system enhancements.
The corrective measures are expected to provide immediate relief to consumers in the Visayas while addressing the technical weaknesses that allowed congestion-related pricing distortions to persist.
Source:
https://mb.com.ph/2026/08/13/erc-orders-fix-for-spot-market-glitch-to-lower-visayas-power-rates