# DC2020-07-0017 — Green Energy Auction Policy (Original) ## Department Circular No. DC2020-07-0017 **Promulgating the Guidelines Governing the Policy for the Conduct of Green Energy Auction in the Philippines** Issued: July 2020 | Secretary Alfonso G. Cusi Effectivity: 15 days after filing with UP Law Center-ONAR and publication in at least two newspapers of general circulation Superseded by DC2021-11-0036 (3 November 2021) --- ## WHEREAS RECITALS 1. RA 7638 §5(b) — DOE mandate to develop and update the Philippine energy program, including preference for environment-friendly, indigenous, and low-cost sources, and direction toward privatization, deregulation, and reduction of dependence on oil-fired plants. 2. RA 9136 (EPIRA) §2 — policy for fair treatment, socially and environmentally compatible energy infrastructure, and promotion of indigenous and RE resources in power generation to reduce dependence on imported energy. 3. EPIRA §37(e)(i) — DOE mandate to encourage private sector RE investment and promote development of indigenous and RE sources. 4. RA 9513 (RE Act) — State policy to increase RE utilization by institutionalizing development of national and local capabilities and promoting cost-effective commercial application through fiscal and non-fiscal incentives. 5. RE Act §6 — RPS mandate; NREB to set minimum percentage from eligible RE resources and determine to which sector RPS is imposed on a per grid basis. 6. DC2017-12-0015 (RPS On-Grid Rules) — Mandated Participants must source or produce the minimum annual RPS requirement from eligible RE resources; DOE, in coordination with NREB, shall establish a market development program for RPS. 7. DC2019-10-0013 (Omnibus Guidelines) — provides Open and Competitive Selection Process (OCSP) as one mode for selecting and awarding RE Contracts for Pre-Determined Areas. 8. 2011-2030 NREP preliminary assessment: total installed RE capacity as of December 2018 is 3,608 MW below target; RE share in generation supply mix reduced to less than 24%. --- ## RULE 1 — GENERAL PROVISIONS ## SECTION 1. TITLE "Guidelines Governing the Policy for the Conduct of Green Energy Auction in the Philippines" — hereafter referred to as the "Green Energy Auction (GEA) Policy." --- ## SECTION 2. PURPOSES AND OBJECTIVES 2.1 **Purposes:** - 2.1.1 Set the framework facilitating competitive procurement of RE supply by Mandated Participants for RPS compliance and long-term power supply requirements under their PSPPs; - 2.1.2 (implied from text: support development and financing access for new RE projects through long-term bilateral contracts); and - 2.1.3 Implement the mandate for preferential bias for RE and indigenous sources for long-term energy independence. 2.2 **Objectives:** - 2.2.1 Assist Mandated Participants (DUs in particular) to develop and fulfill RPS compliance plans; - 2.2.2 Assist RE Developers in accessing markets for bilateral contracts and mitigating market exposure and risks; - 2.2.3 Address price volatility in RE supply procurement and REC pricing; - 2.2.4 Enhance RE programs by promoting a competitive rate-setting for RE supply; and - 2.2.5 Support development of methodology by ERC for regularly setting and updating GEA prices for long-term RE supply contracts (peak and off-peak) for regulated entities. --- ## SECTION 3. SCOPE AND COMPONENTS 3.1 **Scope:** Applies to Mandated Participants of the RPS On-Grid Rules and Qualified Suppliers. 3.2 **Components:** - 3.2.1 **Green Energy Tariff** (Rule 2) — competitive price signal for RE-generated electricity; tariff and/or price cap set by ERC; - 3.2.2 **Green Energy Auction** (Rule 3) — competitive contracting of supply from Qualified Suppliers to Qualified Customers; administered by DOE through the Green Energy Auction Committee (GEAC). --- ## SECTION 4. DEFINITION OF TERMS Adopts by reference terms from EPIRA, RE Act and IRRs, RPS On-Grid Rules, Omnibus Guidelines, WESM Rules, and relevant DOE Department Circulars. Additional definitions: - **ARP** — Auction Round Procedures for each Green Energy Auction round (Section 8) - **Contracting Customer** — Qualified Customer that has entered into a Green Energy Implementation Agreement - **ERC** — Energy Regulatory Commission - **Green Energy Auction** — competitive process for RE supply procurement under this Circular (Section 3.2.2 and Rule 3) - **GEAC (Green Energy Auction Committee)** — the RPS Composite Team established under DC2017-12-0015, with additional powers and functions under this Circular - **GEIA (Green Energy Implementation Agreement)** — agreement among Winning Bidders and Contracting Customers, duly acknowledged by the Market Operator (Rule 4) - **GEAR Price (Green Energy Auction Reserve Price)** — ERC-determined maximum price in PhP/kWh; serves as cap for all Green Energy Auctions - **Green Energy Tariff** — pay-as-bid price (PhP/kWh) for each Winning Bidder from each auction - **LCOE (Levelized Cost of Energy)** — average total cost of building a power generation asset per unit of total electricity generated over assumed lifetime - **Mandated Participants** — electric power industry participants required to comply with annual RPS requirements - **Market Operator** — Autonomous Group Market Operator or Independent Market Operator (whichever applicable under EPIRA IRR) - **Notice of Auction** — written notice issued by DOE under Section 8.1 - **Notice of Percentage Volume Allocation** — written notice by GEAC to relevant parties under Section 10.1 - **Notice of GEAR Price** — advisory from ERC to DOE under Section 5.4 - **NREB** — National Renewable Energy Board (created under RE Act §27) - **OCSP** — Open and Competitive Selection Process under the Omnibus Guidelines - **Percentage Volume Allocation** — percentage share of a Contracting Customer in total generation from Winning Bidders (Section 6.3) - **PSPP** — Power Supply Procurement Plan prepared by a DU - **Qualified Customers** — Mandated Participants qualified to participate in the auction under Section 7.2 - **Qualified Suppliers** — (a) for Supply-Only Auction: DOE-registered RE Developers under Omnibus Guidelines; (b) for Integrated Supply-OCSP Auction: parties eligible under Section 7.3 and Omnibus Guidelines - **RE Contract** — service agreement between Government (through DOE) and RE Developer under RE Act - **REC** — RE Certificates under RPS On-Grid Rules (DC2017-12-0015) and RE Market Rules (DC2019-12-0016) - **RPS / RPS Program** — Renewable Portfolio Standards under RE Act §6 - **RPS On-Grid Rules** — DC2017-12-0015 - **Winning Bidder** — Qualified Supplier with volume offer at or below GEAR Price; has executed a GEIA --- ## RULE 2 — GREEN ENERGY TARIFF ## SECTION 5. PRICING PRINCIPLES 5.1 **General Principle:** Green Energy Tariff reflects competitive market value of RE electricity, displacing non-RE supply during relevant trading intervals. 5.2 **Pricing Parameters:** Resulting GET for each Winning Bidder shall not exceed the GEAR Price. ERC determines GEAR Prices annually — peak and off-peak, or variable and non-variable, or per RE technology — for: (a) combined Luzon-Visayas grid; and (b) Mindanao grid. ERC may consider LCOE per technology and/or FIT pricing parameters. 5.3 **Pricing Unit:** GEAR Price and GET are set on a PhP/kWh basis. 5.4 **Price Determination:** ERC issues the Notice of GEAR Price to the DOE Secretary in strict confidentiality by **31 May** each year. The resulting GET (not to exceed GEAR Price) is authorized for collection from captive customers without further ERC approval. --- ## RULE 3 — GREEN ENERGY AUCTION ## SECTION 6. FRAMEWORK FOR THE AUCTION 6.1 **Offer:** Qualified Suppliers offer specified volume (MWh) under GEIAs at prices at or below GEAR Price. Corresponding RECs attributed to each MWh under GEIAs shall be issued to Contracting Customers per RE Market Rules and RPS On-Grid Rules. 6.2 **RPS Requirements:** GEAC consolidates RPS requirements of Qualified Customers from their PSPPs (DUs) or RPSCT submissions (RES). Consolidated RPS requirements = total supply volume for auction. 6.3 **Percentage Volume Allocation (Supply-Only Auction):** - If consolidated RPS requirement = total registered supply: PVA per customer = customer's RPS requirement / total registered volume; - If consolidated RPS requirement > total registered supply: PVA per customer = customer's RPS requirement / consolidated RPS requirements; - If consolidated RPS requirement < total registered supply: highest-price bids excluded until supply = consolidated requirement; PVA per customer = customer's RPS requirement / consolidated RPS requirements. 6.4 **Maximum Awarded Volume:** Not more than consolidated RPS requirement per auction round. --- ## SECTION 7. GUIDING PRINCIPLES 7.1 **Kinds of Auctions:** - 7.1.1 **Supply-Only Auction** — awards only GEIA; eligible: RE projects already covered by RE Contracts (pre-development or development stage); - 7.1.2 **Integrated OCSP-Supply Auction** — awards RE Contract + GEIA in integrated OCSP-Supply process; provisions of this Circular incorporated in formulating applicable rules. 7.2 **Qualified Customers:** All Mandated Participants under the RPS On-Grid Rules are deemed enrolled. Exclusion mechanisms: - 7.2.1 **Mandatory Exclusion** — DOE Secretary declares exclusion based on legal/technical/financial position, as recommended by GEAC, stated in Notice of Auction; - 7.2.2 **Voluntary Exclusion** — filed with GEAC ≤20 days after Notice of Auction; sworn certification that participant will conduct its own competitive RE procurement; for DUs, competitive procurement details must be in PSPP filed with DOE; participant acknowledges CSP exemption (Section 13) does not apply to its separately procured power supply agreements. Exclusion applies only to that specific auction round. - 7.2.3 **Contracting Customers** — Qualified Customers that receive their Percentage Volume Allocation and execute GEIA. 7.3 **Qualified Suppliers:** RE projects eligible to participate in RPS under DC2017-12-0015 §10 are eligible for the GEA. Qualified Suppliers voluntarily offer all or part of their RE facility generation. Those declared Winning Bidders who sign GEIA are referred to as Winning Bidders. --- ## SECTION 8. AUCTION MECHANICS DOE procures and maintains electronic auction platform for transparent, fair, and efficient auction, including remote participation. 8.1 **Notice of Auction:** Published on DOE website and in ≥1 newspaper by **15 June** each year; emailed to ERC and all Mandated Participant officers/representatives. 8.2 **Contents of Notice:** Issued after public consultation; includes: - 8.2.1 Schedule for Luzon-Visayas (singularly or separately) and Mindanao auctions; dates for ARPs; - 8.2.2 Type of auction (Supply-Only and/or Integrated OCSP-Supply); - 8.2.3 Advisory that all Mandated Participants are included by default unless excluded; and - 8.2.4 Acknowledgment to ERC of adoption of ERC-determined GEAR Price received by **31 May**. 8.3 **Auction Process:** - 8.3.1 ARP includes: auction timeline and milestones; total supply volume (MWh); type of supply (variable or non-variable); delivery period and contract term; applicable annual line rental cap (excess above cap for customer account); applicable GEIA template(s) duly approved by ERC. - 8.3.2 All Qualified Suppliers may register with GEAC. - 8.3.3 GEAC verifies RE project status, issues list of Qualified Suppliers, and holds Pre-Bid Conference ≥20 days before auction. GEAC bulletin addressing queries issued ≤10 days after Pre-Bid Conference. - 8.3.4 Electronic bidding; GEAC issues user-specific electronic IDs. Bids placed by electronic submission on auction date, with bond posted. - 8.3.5 (See 8.3.4) - 8.3.6 DOE discloses GEAR Price upon opening sealed ERC envelope. Bids at or below GEAR Price ranked lowest to highest. Winning Bidders sign GEIA. --- ## RULE 4 — GREEN ENERGY IMPLEMENTATION AGREEMENT ## SECTION 9. COMPONENTS OF THE GEIA - 9.1 **Supply components** — terms of supply by Winning Bidders and receipt/delivery per Percentage Volume Allocation; term, duration, peak/off-peak, variable/non-variable; - 9.2 **Payment components** — payment obligation of each Contracting Customer for actual energy delivered per PVA, at average price (PhP/kWh) per Section 10; - 9.3 **Allocation component** — implementation of PVA in determining hourly actual energy delivered corresponding to RECs; Market Operator computes average price; - 9.4 **Other terms and conditions** — supplemental terms between Winning Bidders and non-DU Contracting Customers (confidentiality, data privacy, dispute resolution, etc.) not contrary to GEA Policy or applicable laws. --- ## SECTION 10. PERCENTAGE VOLUME ALLOCATION AND AWARD 10.1 GEAC conducts final evaluation of total contracting volume and volume to be delivered by each Winning Bidder; determines PVA. - 10.1.1 Each Winning Bidder paid at its offer price (pay-as-bid); - 10.1.2 Each Contracting Customer pays the average price of all volumes dispatched for the billing period, calculated by the Market Operator; - 10.1.3 GEAC regularly reviews PVA, award, and settlement. See Annex A for illustration. 10.2 **Notice of Percentage Volume Allocation** — issued by DOE Secretary on GEAC recommendation; parties given 30 days to submit board resolution authorizing GEIA execution. 10.3 Within the prescribed period, parties submit signed board resolution to GEAC + executed GEIA originals using ARP templates. If parties need more time or decide not to proceed, they advise DOE in writing within the same period. --- ## SECTION 11. POLICY IMPLEMENTATION DOE conducts Green Energy Auction **annually** unless otherwise determined by DOE, upon NREB recommendation based on RPS requirements and NREP. --- ## SECTION 12. ROLE OF THE MARKET OPERATOR MO enters GEIA to acknowledge party obligations; calculates average price (PhP/kWh) per Sections 9 and 10; continues to issue settlement data and facilitate payment under WESM Rules. --- ## SECTION 13. COMPLIANCE WITH CSP A DU contracting through the Green Energy Auction is deemed compliant with CSP requirements under DC2015-06-0008 (as amended by DC2018-02-0003). --- ## SECTION 14. COMPLIANCE WITH RPS RE supply volume under GEIAs counts toward Mandated Participants' RPS compliance under DC2017-12-0015. --- ## SECTION 15. REGULATORY SUPPORT ERC is responsible for approval of: - 15.1 GEIA template; - 15.2 Methodology for setting GEAR Price(s) and notification to DOE prior to each auction; and - 15.3 Where Winning Bidder is an embedded generator, the appropriate wheeling charges on a per-kWh basis. --- ## RULE 5 — FINAL PROVISIONS ## SECTION 16. NON-DIMINUTION OF VESTED RIGHTS No provision of this Circular diminishes any right vested by existing laws, contracts, or agreements. --- ## SECTION 17. SEPARABILITY CLAUSE --- ## SECTION 18. REPEALING CLAUSE All previous issuances, rules and regulations inconsistent with this Circular are hereby repealed, amended or modified accordingly. --- ## SECTION 19. EFFECTIVITY 15 days after filing with UP Law Center-ONAR and publication in at least two (2) newspapers of general circulation. Issued: July 2020 at the Department of Energy, Energy Center, Merritt Road, Fort Bonifacio, Taguig City, Metro Manila. --- ## ANNEX A — Illustration of Percentage Volume Allocation, Award and Payment Annex A provides a worked numerical example of hourly allocation and billing across multiple Qualified Suppliers and Qualified Customers, showing: Market Price Offer (PhP/kWh), Energy Generation (% share and MWh), Billed Amount (Thousand PhP), Percentage Volume Allocation per customer, and average market price computation. The OCR rendering of the tabular data is substantially garbled due to column merging; the annex is illustrative only and is not a substantive policy provision.