Use of WESM’s market fees for capacities traded faces scrutiny

by Myrna Velasco – February 17, 2016

from Manila Bulletin

Scrutiny on the use of market fees for capacities traded in the Wholesale Electricity Spot Market (WESM) will now roll with the engagement of Reyes Tacandong & Co. as third party auditor.

This is on the imprimatur of the Energy Regulatory Commission (ERC) which crafted the terms of reference for the audit process on the budget of WESM operator Philippine Electricity Market Corporation (PEMC) via the request of the Senate committee on energy.

ERC Commissioner Alfredo J. Non said the audit would be “a reasonableness test or audit of PEMC and it will be conducted by Reyes Tacandong & Co. based on the terms of the bidding process that was done earlier.”

He emphasized “the coverage will be for a period of 2006 to 2014 … initially it was 2006 to 2010, but after the Senate hearing, it was extended up to 2014.”

The ERC official added “the procedures will have to be drawn up by the auditors and that has been discussed (February 10) with PEMC and that was agreed also with Reyes Tacandong.”

Non explained further “the coverage of the audit will be looking at the reasonableness of the cost of PEMC – it revolves around the budget it applied for.”

He stressed the third party auditor “will be looking at the market fees on how these were spent based on the cost of PEMC – personnel services, capital expenditures and their operation expenses.”

For whatever outcome to be drawn, the ERC official indicated “it will help us in terms of looking at the proposed budget of PEMC looking forward … in terms of the coverage of our review, should had it been that excessive or should it be not that extensive?”

Non qualified though that the WESM operator’s budget probe will be part of the usual compliance audit.

Primarily, he noted that it will be about examining the “reasonableness objective.” “The question is: Reasonableness in relation to what, right? Or could it be reasonable in relation to the budget? Or could it be in relation to the industry on how they operate? Or, reasonable in relation to expectations?”

Non added “there are several variations but we requested to make clarifications as to the computations of that reasonableness,” fundamentally, when already factored in into their budget or into the market fees collected from the WESM trading participants.