THE SYSTEM OF QUALITY CONTROL

(MERALCO)

A. OBJECTIVE
The Energy Regulatory Commission (ERC) is the independent, quasi-judicial regulatory body
created under the Republic Act No. 9136, otherwise known as the “Electric Power Industry
Reform Act of 2001”. It is mandated, among others, in the public interest, to establish and
enforce a methodology for the setting of transmission and distribution wheeling rates and retail
rates in the Philippine electric power industry.

ERC is seeking the assistance of an independent party to verify whether the Manila Electric
Company’s (MERALCO) reported refunds have been fully accounted for, returned or credited to
its customers’ accounts. The ERC in previous years ordered MERALCO to refund the Bill Deposit,
Meter Deposit, and Income Tax that it collected from its customers.

With its existing organizational structure vis-à-vis its mandates over regulated entities, the ERC
will require the assistance of a Consultant, who may be a person/s or entity engaged in
consulting services that has the technical expertise and capability to conduct an independent
audit and verify all the refunds of MERALCO.

B. SCOPE OF WORK
The Auditing Firm or “the Consultant” shall perform the agreed upon procedures to conduct
independent audit and verification on the completeness of refunds made by MERALCO to its
customers related to (a) utility deposits, (b) meter deposits, and (c) income taxes.

The conduct of agreed-upon procedures shall be in accordance with the Philippine Standards on
Related Services 4400, “Engagement to Perform Agreed-Upon Procedures Regarding Financial
Information”.

The agreed-upon procedures that will be performed are as follows:

1. Audit all refund accounts
2. Verify the completeness of the total refunds required for MERALCO
3. Review and validate the criteria used in determining the recipient and the amount of
the refund.
4. Verify the completeness and accuracy of the customers that received the refund and
the amount received.
5. Verify whether or not such refund has realized any interest

C. RESPONSIBILITIES OF THE CONSULTANT

a. Close coordination with the ERC
Close coordination and regular liaison with the ERC will be an integral part of the scope
of work including the conduct of regular meetings, physically or virtually, regarding the
subject matter. A progress report shall be furnished on a monthly basis, to apprise the
ERC of the development of the project. The Consultant/s shall attend Commission
meetings, if necessary, to present matters to the ERC including but not limited to, issues
arising from work, and shall be recommended with appropriate action.
b. Knowledge Transfer
 The project requires that knowledge about the process and outcome of the audit
conducted be transferred either through workshop or training using either actual
presence or webinar to the ERC. All costs related to the conduct of physical or webinar
workshop or training shall be for the account of the Consultant. The Consultant shall
submit knowledge transfer program/plan to the ERC. In the event that the ERC may be
required to travel to the office of the Consultant, the full transport, accommodation and
subsistence costs associated therewith are to be included in this proposal.

D. RESPONSIBILITIES OF ERC
The ERC shall facilitate the subject audit by providing the following:
a. Assistance in coordinating with MERALCO in soliciting comments and inputs related to
the audit;
b. Technical and Secretariat support to the audit such as but not limited to, coordinating
meetings and other relevant activities; and
c. Determine the acceptability of the deliverables and shall be the approving authority for
all operations-related activities.
E. EXPECTED OUTPUTS
1. Work Plan / Methodology
2. Monthly Progress Report
3. Draft Report on Factual Findings
4. Final Report on Factual Findings

F. TIMELINES/DELIVERABLES
1. Implementation period.
The project shall be completed within ninety (90) days, commencing from the date of
the NTP to the Consultant. An Inception Report shall be submitted by the Consultant
within fifteen (15) days and final outputs shall be submitted at the end of ninety (90)
days. Except, specifically provided in the Terms of Reference or Contract. The
Consultant shall be released from its commitment to the contract not more than
fourteen (14) days upon acceptance of the final outputs by ERC.
2. Deliverables and Timelines.
The main outputs will be the Final Report on Actual Findings discussing the entire result
and findings thereof. In the implementation of the project, the Consultant shall submit
to ERC for validation and approval of the deliverables of each activities/milestones,
following the schedule below:

Outputs/Deliverables
Initial Report providing the Consultant’s
understanding of the tasks and the
methodology to be employed to complete
the task.
Monthly report on the progress of the
consultancy work relative to the above-
defined tasks.
Draft Report on Actual Findings, where
findings are presented including any
recommendations to the ERC
Final Report on Actual Findings, where
findings are presented including any
Timeline
Two (2) weeks from the date of receipt of
the NTP.
Every end of the month from NTP.
Two (2) Months from the date of receipt
of the NTP.
Three (3) Months from the date of
receipt of the NTP.
 recommendations to the ERC

G. QUALIFICATION REQUIREMENTS
1. Qualification Requirement. The validation shall be undertaken by a reputable
Consultant, who may be a person/s or entity engaged in consulting services. The
Consultant shall mobilize key personnel, i.e., a principal/lead consultant and experts.
The Consultant, as well as the principal/lead consultant and experts, must meet the
following qualifications:

QUALIFICATIONS MINIMUM REQUIREMENTS

Quality of the Firm
 Competent audit professionals that
have a reputable auditing firm or
partnership with adequate experience
 Involvement in similar and/or relevant
consulting or professional services of
complexity and technical specialty
comparable to the job under
consideration
 Recognized competence in auditing
 Must have been involve in the audit of
distribution utilities in the Philippines
or in other jurisdictions; knowledgeable
with the nature and process of auditing
a distribution utility.
 Expertise in the field of finance,
accountancy, or other related disciplines
 At least five (5) years extensive
experience in providing auditing and
agreed-upon services.
 Must have been engaged in similar or
relevant agreed-upon procedures
services
 The Auditing Firm is accredited by
Securities and Exchange Commission.

QUALIFICATIONS MINIMUM REQUIREMENTS

Quality of the Personnel
Education
 Educational attainment in accounting,  Must be a college and MA/MS degree
finance, and/or related fields, with holder, PhD will be an advantage.
strong background in accounting and
audit.

Training
 Relevant training in general audits and
IT system audits.
Professional Experience
 Recognized competence in IT controls,
financial, and regulatory and market
audit.
 Involvement in similar and/or related
consulting or professional services of
size, complexity and technical specialty
comparable to the job under
consideration
 Must have at least 40 hours training in
the conduct of IT controls, financial,
regulatory, energy and other similar
and/or relevant audit.
 At least five (5) years of experience in
audit and/or IT controls, financial,
regulatory and energy industry. Must
have been a Team Leader/Manager in
similar and/or relevant consulting
service.
 Must have been involved in similar or
related work engagement
 2. Criteria for Selection. The consultant shall be selected using the Quality Based
Evaluation (QBE) procedure as prescribed under Section 33 of the 2016 Revised
Implementing Rules and Regulations (IRR) of Republic Act (RA) No. 9184 and based on
the following criteria:
a. Quality of personnel to be assigned to the project which covers suitability of key
staff to perform the duties of the particular assignments and general
qualifications and competence including education and training of the key staff;
b. Experience and capability of the consultant which include records of previous
engagement and quality of performance in similar and in other projects;
relationship with previous and current clients; and, overall work commitments,
geographical distribution of current/impending projects and attention to be
given by the consultant. The experience of the consultant to the project shall
consider both the overall experiences of the firm and the individual experiences
of the principal and key staff including the times when employed by other
consultants; and
c. Plan of approach and methodology with emphasis on the clarity, feasibility,
innovativeness and comprehensiveness of the plan approach, and the quality of
interpretation of project problems, risks, and suggested solutions.
Experience Factors: 30%
Firm Factors: 40%
Technical Factors: 30%
H. MODE OF PROCUREMENT
The procurement of the consulting services shall be undertaken through competitive bidding
pursuant to. RA No. 9184 and its 2016 Revised IRR.

I. LIQUIDATED DAMAGES
1. Where the Contractor refuses or fails to satisfactorily complete the work within the
specified contract time, plus any extension o f time duly granted, and is thereby in
default under the contract, the Contractor shall pay ERC for liquidated damages, and
not by way of penalty, an amount, as provided in the conditions of the contract, equal
to one tenth (1/10) of one percent (1%) of the cost of the unperformed portion for
every day of delay. Once the cumulative amount of liquidated damages reaches ten
percent (10%) of the amount of the contract, the ERC may rescind or terminate the
contract, without prejudice to other courses of action and remedies available under the
circumstances such as but not limited to forfeiture of performance security and/or
blacklisting of the Contractor.
2. For entitlement to such liquidated damages, ERC need not prove the damages actually
incurred. Said damages in any amount shall be deducted from any money due or which
may become due the Contractor under the Contract and/or collect such liquidated
damages from the retention money or other securities posted by the Contractor at the
ERC’s convenience.