Guidelines to Govern the Audit Process of Meter Deposit Refund to Residential and Non-Residential Consumers

April 5, 2016

ERC RESOLUTION NO. 13-16

GUIDELINES TO GOVERN THE AUDIT PROCESS OF METER DEPOSIT REFUND TO RESIDENTIAL AND NON-RESIDENTIAL CONSUMERS

WHEREAS, pursuant to the provisions of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act or EPIRA, the Energy Regulatory Commission (ERC) promulgated the Magna Carta for Residential Electricity Consumers and the Distribution Services and Open Access Rules (DSOAR) on June 17, 2004 and January 18, 2006, respectively;

WHEREAS, on October 27, 2004, the ERC adopted the Guidelines to Implement Articles 7, 8, 14 and 28 of Chapter III of the Magna Carta which govern the guidelines and procedures to implement the meter deposit refund for residential customers;

WHEREAS, on June 4, 2008, the ERC promulgated Resolution No. 8, Series of 2008, entitled "Rules to Govern the Refund of Meter Deposits to Residential and Non-Residential Customers". These Rules established the terms and conditions for the implementation of the meter deposit refund for residential and non-residential customers;

WHEREAS, Section 9, Article IV of Resolution No. 8, Series of 2008 provides that the implementation of the meter deposit refund shall be subject to audit by the ERC or such person or entity as the ERC may authorize;

NOW THEREFORE, after thorough and due deliberation, the Commission RESOLVES, as it is hereby RESOLVED, to APPROVE and ADOPT the Guidelines to Govern the Audit Process of Meter Deposit Refund to Residential and Non-Residential Customers:

SECTION 1. Audit of the Meter Deposit Refund. — Upon the effectivity of these Guidelines, the Distribution Utilities (DUs) shall: a) engage the services of an Independent External Auditor (IEA) for the conduct of an audit of the meter deposit refund; and b) submit an Audit Report, on or before December 31, 2016, which shall include the details of the following: AScHCD

1. The principal amount of meter deposits for refund;

2. The total amount of meter deposits already refunded;

3. The total amount of meter deposits still to be refunded;

4. The total amount of unclaimed meter deposits;

5. The total amount of accrued interests of meter deposits;

6. The total amount of meter deposit credited to monthly billings of the consumers;

7. The total amount applied as an offset to the obligations of the consumers;

8. The total amount converted as contribution of member-consumers of the Electric Cooperatives (ECs);

9. The total amount of meter deposit paid in cash or in check to consumers; and

10. Other pertinent information on the implementation of meter deposit refund.

SECTION 2. Scope of the Audit Process. — Before the audit commences, the DU should ensure that all necessary documents as well as key personnel will be available during the audit process. The following procedures shall govern the audit process:

a. The IEA shall prepare and obtain sufficient evidence to support the audit findings and to draw reasonable conclusions on which to base the audit findings.

b. The IEA shall examine the compliance of the DUs with the Commission's rules and regulations on meter deposit refund.

c. The IEA should explicitly state and specify the results (satisfactory and unsatisfactory) of specific procedures for obtaining audit evidence in case of doubt or uncertainty with regard to meter deposit refund. Disclosure of any fraud should be established by sufficient and appropriate audit evidence.

d. The Audit Report should include all financial findings made by the IEA regardless of the amount involved. The IEA is expected to verify that all necessary supporting documents, records and accounts have been maintained by the DU with respect to meter deposit refund. The audit process shall extend, but not limited to the verification of the following: AcICHD

1. Books of accounts of the DU relative to the meter deposit refund;

2. Official Receipts issued by the ECs for meter deposits applied as an offset to the obligation of the DUs;

3. Sample electricity bills of different customer classes reflecting the meter deposit refund as a form of credit to their monthly bills;

4. The calculation of meter deposit refund in accordance with the formula prescribed under the Guidelines to Implement Articles 7, 8, 14 and 28 of the Magna Carta for Residential Electric Consumers, Resolution No. 8, Series of 2008 and DSOAR;

5. The list of the consumers who received the meter deposit refund in cash or in check. The list should include documents evidencing receipt of the cash or check;

6. Duly notarized documents evidencing the waiver of the meter deposit refund by member-consumers;

7. Eligibility and qualifications of the consumers entitled to the refund; and

8. Other relevant information as the IEA may deem necessary.

e. The Commission may, if warranted, request the IEA to provide clarifications or additional information with regard to the final Audit Report.

SECTION 3. Exception Clause. — Where good reason appears, the ERC may allow an exception from any provision of these Rules, if such exception is found to be in the public interest and is not contrary to law or any other pertinent rules and regulations.

SECTION 4. Separability Clause. — If any of the foregoing amendments is declared unconstitutional or invalid, the other provisions which are not affected thereby shall remain in force and effect, unless such declaration would render the whole rules unenforceable or non-implementable.

SECTION 5. Repealing Clause. — All Rules and Guidelines, or portion thereof, issued by the ERC, which are inconsistent with these Rules are hereby repealed or modified accordingly.

SECTION 6. Effectivity. — These Rules shall take effect fifteen (15) days after its publication in a newspaper of generation circulation in the country. TAIaHE

Let copies of these Guidelines be furnished the University of the Philippines Law Center-Office of the National Administrative Register (UPLC-ONAR), Philippine Electric Power Operators Association, Inc. (PEPOA), the Philippine Electric Cooperatives Association, Inc. (PHILRECA) and all distribution utilities (DUs).

Pasig City, April 5, 2016.

(SGD.) JOSE VICENTE B. SALAZARChairman and CEO

(SGD.) GLORIA VICTORIA C. YAP-TARUCCommissioner

ALFREDO J. NONCommissioner

(SGD.) JOSEFINA PATRICIA A. MAGPALE-ASIRITCommissioner

(SGD.) GERONIMO D. STA. ANACommissioner