Regulators to audit energy spot market

ENERGY spot market operator Philippines Electricity Market Corp. (PEMC) is under audit starting this week as the Energy Regulatory Commission (ERC) checks whether fees imposed by the former have been reasonable.

The audit can affect the ERC’s decision on the current budget proposal of PEMC.

“We have already completed the bidding process for the procurement of an external auditor to conduct the market audit of PEMC,” ERC Chair Jose Vicente B. Salazar told reporters.

Audit firm Reyes Tacandong & Co. will conduct the audit, having won a recent bidding for the audit project, ERC Commissioner Alfredo J. Non said.

The audit, Non said, was supposed to be a “reasonableness test” or audit of PEMC. The coverage will be for the period 2006-2014.

Initially the audit period was 2006 to 2010 but this was extended by the Senate to cover up to 2014, Non said. The commissioner said the procedures to be done were drawn up by the auditors and have been agreed upon with PEMC.

Non said the audit would also clarify the recent budget application of PEMC. The auditor would be looking at PEMC’s past market fees and how those were spent, he said. “It (audit) will help us now in terms of looking at the proposed budget of PEMC,” Non said.

PEMC wants to collect P2.08 billion (P1.07 billion for 2016 and P1.01 billion for 2017) from the Wholesale Electricity Spot Market (WESM) participants such as generation companies to cover the cost of operating the energy trading platform. WESM covers Luzon and Visayas and does not yet serve the Mindanao grid.

Whether the audit would highlight the reasonableness (or lack thereof) of market price spikes in the past or touch on the energy spot market design or serve to help PEMC transition into an independent market operator (IMO) is not yet clear.

PEMC has been operating the market since 2006. It is a 15-member body led by whoever serves as secretary of the Department of Energy together with representatives from various sectors of the electric power industry and independent members.

The WESM must be transferred to an independent entity a year after its establishment, according to the Electric Power Industry Reform Act of 2001, but it has not transitioned yet.