The auction organized among the generators based on their offered generation tariffs and their growth in electricity demand is defined as the competitive market.

According to the experiences of competitive markets in foreign countries, usually the right to supply electricity is awarded to the generator based on the lowest offered price.

However, in the Mongolian case, the lowest generation tariff will not be ranked in first place. Instead, the generators who offered to reduce their generation tariff by a higher percentage will be ranked in first. This affords an opportunity for the power plants with significantly different tariffs to have an equal right to participate in the auction market. Besides, due to the specific features of the electricity market of Mongolia, we organized the auction market only on the growth of electricity demand.

The auction market commenced operation on 1 August 2007. According to the "Electricity Auction Market Temporary Rule” approved by the ERC, the "National Dispatching Center” LLC developed and approved an "Auction organization rule for the electricity competitive market”. In total, 4.45 million kilowatt-hours of electricity which is equal to MNT 281.7 million traded in 2011 in the auction market. Power Plants participated in the auction market decreasing their energy tariff by 0.2%.