ERC proposes gas auction prices of up to P7.16 per kilowatt-hour

By Sheldeen Joy Talavera, Reporter

THE Energy Regulatory Commission (ERC) said it proposed price caps for the first mid-merit natural gas auction, of up to P7.16 per kilowatt-hour (kWh).

In a draft resolution, the ERC proposed gas auction threshold (GAT) prices which vary depending on the type of gas-fired power plant, with existing combined-cycle gas turbine (CCGT) facilities assigned the lowest thresholds and new-build facilities requiring higher rates. 

Citing the Department of Energy’s (DoE) reference parameters and preliminary price calculations, the ERC is looking to set the GAT price for an existing 1,400-megawatt (MW) CCGT facility in Luzon at P2.76 per kWh, while the threshold for an existing 500-MW CCGT facility at P2.66 per kWh.

For new facilities, the preliminary threshold is P7.16 per kWh for a new-build CCGT plant, P4.45 per kWh for an open-cycle gas turbine plant, and P6.79 per kWh for a gas-reciprocating engine facility.

The GAT price represents the maximum allowable price offer for bidders and covers the capital recovery and operations and maintenance costs of the facilities.

Fuel commodity costs and capped landed logistics costs are excluded and will be recovered separately through a fuel cost pass-through mechanism.

The DoE’s calculations assume a reference net capacity factor of 42%, equivalent to 14 hours of operation daily, for cost recovery. The assumption is used to calculate the auction threshold and does not constitute a guaranteed minimum dispatch or take-or-pay obligation.

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

The government plans to auction off a total of 3,840 MW of mid-merit capacity covering existing and upcoming generation capacity in Luzon and Visayas.

The auction target is 2,900 MW of gas-fired capacity in Luzon for delivery starting this year through 2031, and 940 MW in the Visayas, particularly Cebu and Panay, between 2028 and 2031.

Last month, the DoE issued the list of pre-qualified bidders for the auction, which include 10 companies including LNGPH and Prime Infrastructure Capital, Inc.

The DoE hopes to award contracts before the end of the year.