The Energy Regulatory Commission (ERC) has rejected claims that price offers in the third round of the Green Energy Auction Program (GEA-3) showed anti-competitive conduct, saying bids near reserve price ceilings reflected limited competition rather than collusion.

In a June 30 press statement, the ERC said no evidence had been presented to prove explicit coordination or anti-competitive behavior among developers that participated in the auction for non-FIT-eligible renewable energy technologies, which covered geothermal and pumped-storage hydropower projects.

The commission issued the statement in response to a June 23 article by the Philippine Center for Investigative Journalism (PCIJ), which raised concerns over GEA-3 bidder conduct and the potential impact of auction prices on consumers.

ERC said GEA-3 was a “thin market auction,” noting that only three geothermal plants qualified with a combined capacity of 30.887 megawatts against a 100-MW target. Pumped-Storage Hydropower Lot 1 also had only three bidders, while the withdrawal of the 52-MW Maibarara Geothermal Plant further reduced competition in the geothermal segment.

“In this context, the economics of reverse auction theory are unambiguous: when the number of competing bidders is structurally limited, rational profit-maximizing behavior leads each bidder to anchor its offer near the reserve price ceiling rather than shade it aggressively downward,” the ERC said.

“This is not collusion. This is the predicted equilibrium outcome in thin markets,” it added.

The regulator also clarified that its role in GEA-3 was limited to price evaluation. It said the Department of Energy (DOE) and the Green Energy Auction Committee, not the ERC, decide winning bidders, award contracts, and approve auction terms.

ERC said its internal benchmark rates for GEA-3 were based on a discounted cash flow model that considered project costs, operations and maintenance expenses, financing conditions, capacity factors, asset life, and tax incentives under the Renewable Energy Act.

The commission said these rates were meant to serve as cost-reflective ceilings, not target prices.

“They are not targets. They are ceilings grounded in cost reality,” ERC said.

The ERC also disputed the interpretation that a 99.86% figure cited in the PCIJ article meant developers copied the government’s maximum price limits. It said the figure referred to the weighted average evaluation score of 14 price offers, measuring how bidders’ technical and financial assumptions complied with thresholds under the Price Determination Methodology Rules.

According to the commission, a high compliance score does not mean price offers were set at the maximum. It said it had already flagged to the DOE that many developers used maximum parameter values from the methodology annexes instead of submitting project-specific cost data.

ERC said it also corrected several offers that exceeded reasonable cost benchmarks. These included geothermal bids from Tanawon, Mindanao 3 Binary, and Bago Binary, as well as pumped-storage hydropower bids from Wawa and Pakil.

For Tanawon Geothermal, the ERC recommended PHP 7.7726 per kilowatt-hour from the offered PHP 8.2258 per kWh. For Mindanao 3 Binary, it recommended PHP 5.1164 per kWh from PHP 9.9316 per kWh, while for Bago Binary, it recommended PHP 8.1173 per kWh from PHP 12.1687 per kWh.

For pumped-storage hydropower, the commission recommended PHP 5.3561 per kilowatt-hour for Wawa and PHP 5.4597 per kWh for Pakil, after finding that the offers used a 20-year cost recovery assumption instead of the 40-year economic useful life prescribed under the methodology.

Based on DOE records cited by the ERC, all bidders accepted the recommended rates except First Gen/Lopez’s Mindanao 3 Binary plant, which declined and was later disqualified from the awards.

The ERC acknowledged that GEA-3 raised structural concerns, including thin geothermal supply, the effects of marginal-offer rules applied per lot, and the absence of a pre-disclosed Green Energy Auction Reserve Price as a public reference ceiling.

However, it said these concerns should be addressed through improved auction design in future rounds, not by attributing bad faith or anti-competitive conduct to developers without evidence.

The commission said it remains ready to work with the DOE on reforms to help future green energy auctions deliver renewable energy capacity at competitive prices for Filipino consumers.

How can future green energy auctions be designed to attract more bidders while keeping renewable energy prices competitive for consumers?

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