DOE’s Mid-Merit Natural Gas Capacity Auction Faces Criticism Over Cost and Flexibility

The Department of Energy has announced a centralized auction to procure 3,840 MW of mid‑merit natural‑gas capacity across Luzon and Visayas. The plan calls for 1,400 MW from existing plants in Luzon in 2026, an additional 500 MW in 2027, and 440 MW of new LNG plants in Cebu and Panay in 2028, with further 1,000 MW for Luzon and 500 MW for Cebu by 2031. Critics argue that limiting the auction to gas ignores the economic realities of the grid, risks over‑estimating demand, and forces consumers to pay for capacity that may not reduce overall electricity costs. The program also exposes the market to global LNG price swings, as seen when Middle Eastern disruptions pushed prices to US$26.00 per MMBtu in September 2026, raising the fuel cost of gas plants to over P11.40 per kWh. The auction’s design means that once a contract is awarded, utilities cannot back out, potentially locking in long‑term costs. In Luzon, where supply margins are healthy, the need for additional gas is questioned, while in Visayas, constrained interconnections and high local prices make gas a more viable alternative to diesel‑based generation. The debate centers on whether the auction will truly enhance grid reliability or simply inflate consumer bills.