ERC to pursue audit of NGCP, PEMC

by Lenie LecturaJuly 10, 2016

from Business Mirror

THE Energy Regulatory Commission (ERC) is pursuing the conduct of an audit of the operation of the National Grid Corp. of the Philippines (NGCP) and the Philippine Electricity Market Corp. (PEMC).

ERC Chairman Jose Vicente B. Salazar said recently that “nothing has changed” since a “misunderstanding” with the NGCP occurred. He meant that an audit would still push through.

When asked to elaborate, Salazar said a division chief of the grid operator expressed reservation on the conduct of an audit via a letter sent to the ERC. He said this came as a surprise since the ERC was under the impression that NGCP President Henry Sy Jr. had already expressed support on this.

“The letter did not come from the NGCP president but from a division chief. I was relying on the discussion that I had with [Sy]. He’s open and supporting this. The ERC will pursue, nothing has changed. The NGCP will procure a consultant which will undertake a review process,” Salazar said.

The audit aims to assess how the NGCP is operating the grid, how it is maintaining the reliability of the country’s transmission system, and how its operations comply with regulations concerning the Wholesale Electricity Spot Market (WESM).

If the audit pushes through, this will be the first compliance assessment of the NGCP since it was given the franchise to operate, maintain and expand the country’s power-transmission system in 2008.

He said the performance audit of the NGCP is also crucial “to the country’s bid to ensure that the whole power-supply infrastructure from generation to distribution to industries and households continue to be efficient, reliable and cost-effective.”

The NGCP was directed by the ERC to tap an independent third party to conduct a review of its operations.

The conduct of the review by the third party shall be done in consultation with the ERC and industry stakeholders. The review will, likewise, be supervised by the ERC via a technical working group, which shall be composed of officials from the commission and its Grid Management Committee.

A report will be prepared by the third party and shall be submitted to the commission.

The ERC directed the NGCP to fully cooperate in the conduct of the review. The NGCP will also shoulder the cost of the procurement of the third party.

The NGCP is a private consortium that holds the 25-year concession to operate the country’s power-transmission network. The Sy-led consortium is composed of the State Grid Corp. of China (40 percent), One Taipan Holdings Corp. (30 percent) and Calaca High Power Corp. (30 percent).

Meanwhile, the PEMC audit, Salazar said, would take six months.

He said the audit “can go side by side” with the conduct of other audits on the spot-market operator.

“Because it is independent, the audit can go side by side. I don’t think there will be a problem. So, yes, the PEMC audit is ongoing,” Salazar commented.

This after PEMC President Melinda Ocampo recently urged the ERC to fast track the conduct of an audit because the “PEMC would still have to undergo other audits soon.”

The ERC has tapped Reyes Tacandong & Co. to conduct the audit on the operator of the country’s trading floor for electricity.

Former Sen. Sergio Osmeña III earlier told the ERC to conduct an independent audit on PEMC, since the latter is not subject to audits by the Commission on Audit being a private corporation. The PEMC board is a 15-man body composed of representatives from each sector of the electric-power industry, as well as independent members. It is chaired by the secretary of the Department of Energy (DOE). The DOE also appoints the member of the board.

SGV & Co. has been engaged by PEMC as external auditor since 2006.

Under the Electric Power Industry Reform Act of 2001, PEMC is supposed to last for only one year and would transition to an independent market operator (IMO). The PEMC has existed for 12 years now.

Osmeña had pointed out that the DOE secretary should already be out of PEMC or IMO as its chairman because it cannot be really independent of the government if the chairman is the DOE chief, which issues policies, some of which becomes part of the rules of PEMC and WESM.