The Energy Regulatory Commission (ERC) ordered the suspension of the flawed collection of excessive Line Loss and Congestion Cost (LLCC) charges, bringing relief to electric consumers, especially in the Visayas.

House Minority Leader and 4Ps Party-list Rep. Marcelino Libanan said the ERC on Aug. 13 ordered corrective measures in the charging of LLCC after finding that the WESM had been incorrectly calculating the congestion component of electricity prices.

“We expect to see lower power rates in the Visayas, and refunds to consumers who saw their electricity bills surge by anywhere from P2.00 to P5.99 per kilowatt-hour because of the erroneous pass-on of excessive LLCC charges,” Libanan said.

Line Loss is the natural waste of electricity as power travels through wires and equipment over a distance, while Congestion Cost is the extra price added when transmission lines are too full to carry cheap power, forcing the grid to use more expensive local generators.

Together, LLCC, more familiarly referred to as line rental charges, forms one of the biggest chunks of charges being passed on by distribution utilities to electric consumers.

The Federation of Rural Electric Cooperatives in Region 8 (FRECOR 8), the organization of 11 electric cooperatives in Eastern Visayas, said that from January to July this year, the distribution utilities in the region were billed a total of P1.55 billion for LLCC.

During the Aug. 11 hearing of the House Committee on Energy, Libanan lashed out at the exorbitant LLCC charges, citing a complaint from the Eastern Samar Electric Cooperative Inc. (ESAMELCO).

“The oppressive LLCC charges constitute an added burden on electricity consumers, many of whom are already struggling with rising living costs and finding it increasingly difficult to provide for the basic needs of their families,” Libanan said.

“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 added.

The ERC said the problem was not primarily in the formula for distributing market surpluses, but in the way the Wholesale Electricity Spot Market (WESM) pricing model computed electricity prices when the high-voltage direct current (HVDC) links reached their transmission limits.

Instead of properly reflecting congestion as an additional cost, the ERC said the system generated separate baseline prices for the affected regions, distorting the computation of Line Rental charges.

Under its order, the ERC directed the Independent Electricity Market Operator of the Philippines (IEMOP) to suspend the collection or payment of the Line Rental Trading Amount in cases where different electricity prices are generated because of constraints at HVDC interconnections or between pricing regions.

The ERC also ordered a permanent correction of the pricing methodology and directed IEMOP to engage an independent auditor to recalculate the market's Net Settlement Surplus and Net Settlement Deficit allocations dating back to June 26, 2021.

The audit could lead to refunds for consumers who were overcharged. IEMOP was ordered to submit a proposed methodology and timetable for refunding or collecting any resulting adjustments from affected market participants and consumers, with the adjustments potentially spread over several billing periods.