CANE POINTS: Power Rate Computation is Not Whimsical

Whenever the power rate on the consumer’s monthly electric bill increases compared to the previous month’s power rate, most consumers are quick to blame the distribution utilities (DUs).

Even if the power rate remains the same but the power consumption increased, most consumers still blame the DUs for the increase in their electric bill.

Majority of consumers mistakenly believe that DUs simply grab numbers from thin air, shake the numbers in their cupped palms, throw them on a piece of paper, and then impose the resultant figure as power rate for the month. Nothing is farther from the truth.

The power rate is a strictly regulated figure based on meticulously derived mathematical formulas duly approved by the Energy Regulatory Commission. Every single figure or number in each formula in the computation of the power bill strictly follows explicit guidelines mandated by the ERC.

And the power bill for each and every month is submitted by the DUs to the ERC for its review to ensure that consumers are charged no more, no less than the correct applicable power rate for that month, based on the ERC-approved formulas.

Prior to the Electric Power Industry Reform Act of 2001 (EPIRA), the power bill contained only two components: the Basic Rate and the much-maligned PPA (Purchased Power Adjustment). The Basic Rate, which covers non-power operating costs (such as personnel salaries and benefits, operation and maintenance, capital expenditures, etc.), remains constant, while the PPA fluctuates, depending on cost of the purchased power.

Pre-EPIRA, the only variable item in the electric bill was the PPA. Post-EPIRA, the electric bill was unbundled for transparency. Hence, the electric bill now has separate items like the Distribution Charge, the Transmission Charge, the Generation Charge, Subsidies (Lifeline Rate and Senior Citizen Discount), and Taxes & Universal Charges.

Of all these various charges, only the Distribution Charge remains unchanged month after month. And it is only the Distribution Charge which goes direct to the DUs. The rest of the charges are pass-through charges, which the DUs simply collect and then remit to the concerned industry stakeholders. The Transmission Charge goes to the National Grid Corporation of the Philippines, while the Generation Charge goes to the power producers.

Whether the power rate increases or decreases depends largely on the Transmission Charge and the Generation Charge, both of which vary every month.

Transmission Charges vary according to the stability of the transmission system and the grid. These charges often fluctuate, resulting to higher rates, whenever there are congestions or systems malfunctions along the high-voltage power transmission infrastructure, or whenever independent standby power producers are required to supply power to stabilize the power supply and demand balance in the grid.

As to the Generation Charge, this also fluctuates every month, depending of the power supply and demand equation.

Take for instance the power rates of Negros Power for January and February this year.

Negros Power’s January residential rate increased by ₱1.0635/kWh, from ₱12.0441/kWh in December 2025 to ₱13.1076/kWh in January. This was caused by the high power rates at the Wholesale Electricity Spot Market, due to the reduction of available power supply in the Visayas Grid.

For February, Negros Power’s rate decreased by ₱1.66 per kWh, from ₱13.10/kWh last January to only ₱11.44/kWh this February. Negros Power explained that the substantial drop in its power rate was caused by sharp decrease of WESM rates, due to improved power supply in the Visayas Grid.

The computation of every distribution utility’s power rates are duly-approved, strictly regulated and regularly reviewed by the ERC. Fluctuations in the power rates are inevitable, because each component of the power bill contains numerous variables in the prescribed formula for its computation. There is no malice behind the fluctuations; that’s simply the nature the power bill.* (BB)