The Energy Regulatory Commission (ERC) has granted the plea of the Philippine Electricity Market Corporation (PEMC) to consolidate the audit of its net settlement surplus (NSS) amounts and price substitution mechanism (PSM) software along with the scheduled audit the Wholesale Electricity Spot Market’s (WESM) systems and processes.

“After due consideration and careful evaluation of the foregoing submissions, the Commission finds PEMC’s motion meritorious,” the ERC has stated in its ruling.

The audit of the NSS amounts and PSM software are in line with the regulator’s mandate for the market operator “to contract an external auditor” to carry out the said tasks.

In simpler definition, the NSS would refer to the refund of the excess amount provisionally collected
for line loss and transmission congestion.

The PSM, on one hand, would account for the lower prices being applied or used instead of the higher actual market prices when there is congestion in the system; such as the San Jose substation shutdown incident in 2008.

On the proposed consolidation of audit processes, the PEMC argued that such “shall provide an integrated approach to all the systems and processes of the Market Operations and guarantee an extensive review of the process.”

With the proposal, the market operator also indicated that the findings and recommendations of the external auditor are expected to “be more comprehensive and practicable; and ultimately enhance the credibility of the audit process for the benefit of the market participants.”

PEMC has scheduled the market processes’ audit from August until the end of this year. A consolidated audit, it further noted, will consider market operations in its entirety and could possibly address more than one market issue simultaneously.

In granting PEMC’s motion, the ERC required that it shall be duly represented “in all stages leading towards the engagement of the external auditor.”

It added that “the portion of the audit pertaining to PSM and NSS shall remain to be administered by the Commission;” and that it shall be given the authority to call upon the independent auditor as circumstances would warrant.