By Sheldeen Joy Talavera, Reporter

SINGAPORE — The Philippine Energy Regulatory Commission (ERC) is aiming to set the ceiling price for the country's mid-merit gas auction in November, with the regulator projecting the cap to come in above P10 per kilowatt-hour (kWh). Once issued, the ceiling will serve as the outer bound on the price offers bidders may submit — and, by extension, on what winning generators can charge for mid-merit power under the resulting contracts.

ERC Chairman and Chief Executive Officer Francis Saturnino C. Juan said the auction rules and the initial gas auction price are targeted for release next month, while the auction itself is scheduled to take place within the year.

"We're trying to craft a regulatory framework that protects consumers from losses and prevents stakeholders from excessively recovering their capital costs," Mr. Juan said on the sidelines of Singapore International Energy Week, the annual industry gathering in the city-state.

Under the Department of Energy's (DoE) proposed auction design, gas-fired plants would be allowed to recover their capital costs on the assumption that they operate at full capacity 42% of the time. That operating profile reflects the mid-merit role the plants are meant to play, sitting between round-the-clock baseload units and peaking generators that run only during periods of peak demand.

"We are still determining the final mechanism. But the next step we need to take is to issue the gas auction implementing rules, as this was mandated to us," Mr. Juan said.

The ERC is tasked with setting the pricing mechanism for the auction dedicated to gas-fired power plants and is required to issue a gas auction threshold that will serve as the maximum allowable price offer, expressed in pesos per kWh.

The DoE plans to auction off a total of 3,840 megawatts (MW) of mid-merit capacity covering existing and upcoming generation capacity in Luzon and the Visayas. Luzon, the country's largest power grid, accounts for the bulk of the offering: 2,900 MW of gas-fired capacity, with deliveries starting this year through 2031, while 940 MW is earmarked for the Visayas — particularly Cebu and Panay — for delivery between 2028 and 2031.

Last month, the DoE released the list of pre-qualified bidders for the auction, drawing 10 companies, including LNGPH and Prime Infrastructure Capital, Inc. The sequencing puts the pricing framework, the auction itself, and contract awards — targeted before the end of the year — on a compressed year-end timeline.

The government is positioning natural gas as a "transition fuel" to support the country's shift toward clean and sustainable energy. The auction is the policy vehicle for that positioning, converting existing and upcoming gas-fired capacity into contracted supply for the Luzon and Visayas grids, with deliveries running as far out as 2031.

Source: BusinessWorld