CANE POINTS: Generation, Transmission Charges Cause April Power Rate Hike

Negros Power announced last week that the average residential electricity rate for April increased by ₱0.8356/kWh to ₱12.2463 per kilowatt-hour (kWh) from the March 2026 rate of ₱11.4107/kWh.

The distribution utility attributed the rate increase to “higher power supply costs and increased transmission-related charges affecting consumers in the Visayas”.

Short version: Aside from pressure caused by historically high fuel prices, the existing power infrastructure in the country, particularly the lack of power reserves, will likely cause power rates to be higher than if the national grid has sufficient power reserves.

For this particular month, generation charges increased because prices in the Wholesale Electricity Spot Market (WESM) increased. The price of electric power, like all commodities, follows the law of supply and demand.

Any unexpected trouble in power generation plants will cause the shutdown of those affected power plants for needed repairs, consequently reducing available power supply to the grid. Since demand for power remains high, the prices for definite (you can even say “limited”) available power supply at the WESM increases.

Instead of buying power with unpredictable prices from the WESM, why don’t distribution utilities simply purchase 100% of its power requirement through fixed contracted price?

The power requirements of a DU fluctuates. During peak hours in the morning (when people are preparing to go to school or to work) and in the late afternoon to evening (when people return home, prepare dinner and use other appliances before going to sleep), power demand is high. During office or school hours and during nighttime sleeping hours, demand for power is lower than during peak hours.

If a DU binds itself to buy the volume of power based on the demand during peak hours, then the DU has to pay for whatever unused power during off-peak hours. Prudence dictates that the DU buys only the average volume of power during most of the off-peak hours, and then buy the needed power during peak hours from the WESM, so that the DU and the consumers will not be burdened to pay for unused power.

The only catch is that WESM prices are dictated by the law of supply and demand. When a power plant conks out and power supply in the grid is reduced, WESM prices increases due to the increase in demand.

When there is a shortage of power due to the shutdown of a power plant or two, the national grid becomes unbalanced, causing power trip offs / interruptions if no corrective action is taken.

To balance the national grid (or ensure roughly equal power demand and power supply) and thus maintain the uninterrupted transmission of power from the generators to the consumers, the National Grid Corporation of the Philippines (NGCP) taps the services of ancillary service (AS) providers who supply the needed power to stabilize or maintain the balance in the grid.

The AS providers don’t operate for free, because they also incur huge costs in generating the power they provide for grid stability. However, this group of power industry stakeholders often escapes the notice of consumers because the rates which AS providers charge are lumped together with the transmission charge.

Thus, if the Transmission Charge increases, it is NGCP which gets the blame, although NGCP’s wheeling rates (which is the only part of the transmission charge that goes to NGCP) did not increase. In this sense, the NGCP is akin to the DUs who get blamed for increases in their pass-through charges, or the charges which they only collect and then forward the payment to another party.

But this month, NGCP’s Wheeling Charge did slightly increase by several centavos from P0.6677 per kWh last month to P0.7022 per kWh this month. On the other hand, the Ancillary Service Charge for this month increased to P0.8516 per kWh from P0.8275 per kWh last month.

The increase in the Generation Charge and the Transmission Charge, which are both pass-through charges, caused the slight increase in Negros Power’s April power rate.

“These changes are driven by market conditions and industry-related charges that impact all electricity consumers. Negros Power does not set these costs, as they are pass-through charges based on supply conditions and grid-related expenses,” Negros Power pointed out, as the DU reiterated its commitment to keeping consumers informed about electricity rate movements.* (BB)