Three years earlier, when an NGCP submarine cable failed, Iloilo’s power distributor owed P66 million in a single month, about P1.54 per kilowatt-hour landing on households that had nothing to do with a broken cable.
Line rental is the electricity market’s bill for two facts of physics: power is lost as heat over distance, and transmission lines, like highways, can become congested. When a transmission corridor jams, prices split across the grid, with buyers paying more than sellers receive. The resulting price difference ultimately flows into electricity bills. In that sense, “line rental” is a misnomer.
Ironically, that money is already being refunded. Under rules dating back to 2009, the market’s settlement surplus is returned to utilities and deducted from the generation charge.
Flawed fixes
So why are electric cooperatives still bleeding? One reason is that the refund is diluted—spread across consumers based on kilowatt-hour usage. This means a Visayas cooperative that paid P5.67 per kWh gets the same proportional share as a Luzon utility that paid nothing. Since 2018, generators have also been entitled to a share of the consumer-funded pool.
And because execution has been problematic: in 2019 the regulator ordered P11.77 billion in refunds after nearly a year of mis-computed allocations. No one can explain this but the culprit may be in the software calculating this “line rental.”
Two popular fixes could make things worse.
The first is zonal pricing, or setting one price per island. But this could mask transmission congestion rather than eliminate it. California abandoned zonal pricing in 2009 after problems with generators exploiting congestion within zones, while Germany continues to spend billions of euros annually managing grid congestion despite operating under a single-price system.
The second is making National Grid Corporation of the Philippines (NGCP) absorb all congestion costs without exception. This carries its own risks: as a regulated monopoly, NGCP could seek to recover additional costs through future rate adjustments, while unlimited liability could raise borrowing costs ultimately borne by consumers. It could also create incentives to operate transmission lines closer to their limits to avoid congestion penalties.
The real fix
The real fix is almost boring: repair the refund mechanism we already have. Amend the settlement rules so congestion revenues are returned in proportion to what each utility actually paid. End generators’ share of the consumer-funded pool and show the refund on electricity bills as a separate, independently audited line item.
These changes would require a rules amendment and a regulatory directive—not a new law—with the first credited bill possible within a year. Refund the loss over-collection too, and audit the contracts that genuinely charge losses twice.
The Net Settlement Software (NSS) should also be investigated to determine whether there is a glitch in its algorithm.
Then hold NGCP to real accountability: impose a congestion budget with penalties, doubled on corridors it has always known about; set firm deadlines backed by financial consequences; and establish one non-negotiable rule—no congestion penalty should ever be recovered through wheeling rates.
Months when line rental charges reach P5.67 per kWh could recur until the necessary grid infrastructure is built. Until then, the least we owe consumers behind the bottleneck is simple: when they pay the toll, the refund should come back to them. —Ed: Corrie S. Narisma
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
