Study on Economic Partnership Projects in Developing Countries FY2018
Feasibility Study on the Regulations for Implementing Quality Electricity Infrastructure in the Philippines
Final Report
March 2019
Prepared for:
Ministry of Economy, Trade and Industry (METI)
Prepared by:
KPMG AZSA LLC
2© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Table of ContentsPage
0 Executive Summary 4
1 Identification of Issues of the Philippine Power Sector and Proposals for Remedial Measures Based on the Knowledge and Experience of Japan 7
1.1 In-Depth Analysis and Verification of the Issues Identified in FY2017 Study 8
1.2 Proposals for Remedial Measures to Address the Issues Based on Japanese Knowledge 9
2 Proposals for Institutional Arrangements to Propel the Implementation of Quality Electricity Infrastructure 12
3 Assistance toward the Implementation of the Advanced Power Generation O&M Training Course in the Philippines 22
4 Sharing the Results of the METI Model Plant Study and Diagnosis Projects in FY2017 with the Government of the Philippines 25
5 Procedures and Issues toward the Effective Utilization of the Long-Term Expert Dispatch Programs and Proposals to the Government of the Philippines 28
※This report has been formulated based on the study items as agreed upon the consignment contract as of 6 July, 2018. The procedures undertaken as part of this study is agreed between METI and KPMG AZSA LLC, and henceforth KPMG AZSA LLC bears no liabilities to third parties, regardless of whether those third parties obtained this report through a copy or disclosure by METI.
3© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
AbbreviationsAPEC Asia Pacific Economic Cooperation
DMC Distribution Management Committee
DOE Department of Energy
DU Distribution Utility
EC Electric Cooperatives
EPIMB Electric Power Industry Management Bureau
EPIRA Electric Power Industry Reform Act
ERC Energy Regulatory Commission
GU Generation Utility
IPP Independent Power Producer
LGUOU Local Government Unit-Owned utilities
METI Ministry of Economy Trade and Industry
NEA National Electrification Agency
NGCP National Grid Corporation of the Philippines
※This report has been formulated based on the study items as agreed upon the consignment contract as of 6 July, 2018. The procedures undertaken as part of this study is agreed between METI and KPMG AZSA LLC, and henceforth KPMG AZSA LLC bears no liabilities to third parties, regardless of whether those third parties obtained this report through a copy or disclosure by METI.
NPC National Power Corporation
O&M Operation and Maintenance
PAA Power Sector Performance Assessment and Audit
PDP Power Development Plan
QTP Qualified Third Party
RE Renewable Energy
SPUG Small Power Utility Group
T&D Transmission and Distribution
WESM Wholesale Electricity Spot Market
5© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Background and Objectives of the Project
• In the Philippines-Japan Meeting on January 2017, Prime Minister Abe declared the formulation of the Power Sector Action Plan in the Philippines. In this regard, the Ministry of Economy, Trade and Industry (METI) of Japan formulated the said Action Plan and delivered it to the Philippine government at the first Philippines-Japan Joint Committee on Infrastructure Development and Economic Cooperation held in March 2017.
• The Power Sector Action Plan in the Philippines aims to solve the issues in the Philippine power sector by implementing quality electricity infrastructure.
Power Sector Action Plan in the Philippines
Project Objectives
This project aims to realize an institutional system that can facilitate the implementation of quality electricity infrastructure in the Philippines reflecting the results of the “Feasibility Study on the Regulations for Implementing Quality Electricity Infrastructure in the Philippines” (referred to as ‘FY17 Study’ hereinafter)
6© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Through a mixture of the desktop research in Japan and the field studies in the Philippines, the following items were accomplished through this project:
(1) Identification of issues of the Philippine power sector and proposals for remedial measures based on the knowledge and experience of Japan
・In-depth analysis and verification of the issues identified in FY2017 Study・Proposals for remedial measures to address the issues based on Japanese knowledge
(2) Proposals for institutional arrangements to propel the implementation of quality electricity infrastructure
(3) Assistance toward the implementation of the Advanced Power Generation O&M Training Course in the Philippines (selection of attendants, coordination with relevant parties, etc.)
(4) Sharing the results of the METI Model Plant Study and Diagnosis Projects in FY2017 with the Government of the Philippines
(5) Procedures and issues toward the effective utilization of the long-term expert dispatch programs and proposals to the Government of the Philippines
Contents of the project
Contents of the Project
1 Identification of Issues of the Philippine Power Sector and Proposals for Remedial Measures Based on the Knowledge and Experience of Japan
8© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1.1 In-Depth Analysis and Verification of the Issues Identified in FY2017 Study
Through interviews with some Japanese companies doing or planning to do business in the Philippine power sector, the following issues were identified. They were shared with the Philippine DOE, and it turned out that DOE was aware of various problems that would occur due to deteriorated infrastructure quality.
Sub-sector Quality issues Benefits from solving the issues
Transmission & Distribution
• Transmission congestion caused increase in WESM prices and imposed more economic burdens on end users
• The present Transmission Development Plan is not necessarily optimal
• The quality of transmission and distribution infrastructure is being deteriorated
Reduction in electricity costs and tariffs
Generation
• Deterioration of existing power plants due to lack of optimal maintenance
• GENCOs tend to pursue short term profit and lack the incentives to implement highly efficient equipment with high initial cost
9© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1.2 Proposals for Remedial Measures to Address the Issues Based on Japanese Knowledge
The influence of the degradation of the generation, transmission and distribution facilities can be depicted in the diagram below. By improving the degradation of the facilities, increases in electricity tariffs which are one of the issues in the Philippine power sector can be suppressed.
Degradation of generation
facilities
Occurrence of forced outages
Decreased generation capability
Dispatch of less efficient generators
(with lower heat rate)
Increase in electricity
tariffs
Degradation of T&D facilities
Occurrence of transmission constraints
10© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1.2 Proposals for Remedial Measures to Address the Issues Based on Japanese Knowledge
In the Philippines, a checking mechanism for the quality of electricity infrastructure has already been in place through the performance inspections conducted by ERC. Apart from ERC, DOE undertakes PAA (Power Sector Performance Assessment and Audit) in order for them to establish a basis for new policies that will encourage the enhancement of infrastructure quality.
DOEが実施するPAAに対して、PAAを実施する体制⾯の強化、監査実施⽅法の検討、ERCとは異なる観点からの監査の実施等の改善案を提案した。
Agencies in charge Main undertakings Authority towards solving the issues
Energy RegulatoryCommission (ERC)
Checking the compliance with the technical standards
Penalizing and/or incentivizing improvements in infrastructure quality in line with the incentive regulation
Department of Energy(DOE)
Checking the compliance with the present laws and regulationsIdentifying cause of the degradation of electricity infrastructure
Implementing new policies to encourage the enhancement of quality of electric infrastructure quality
11© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1.2 Proposals for Remedial Measures to Address the Issues Based on Japanese Knowledge
PAA (Performance Assessment and Audit) is a measure taken by DOE in order to make a basis for new policies for reliable electricity supply in the Philippines, which began in 2017.
Item Description
Purpose ‘Assessment’ means compiling information to make a basis for future policy setting and ‘Audit’ means checking the compliance with existing laws and regulations.
Subject All GUs and DUs
Legal basis Department Circular “DC2017-05-0008”
Procedures • Around 10 staffs from DOE for generation and distribution• An assessment form is to be written by the utility and the audit is based on it. • Audit procedures on site is • Period of audit on site approximate a week, and often undertaken to the same area to
audit both generation and distribution• Around 10 companies are subject to PAA annually
Checkpoints Compliance with laws and regulations including the Grid Code and Distribution Code, the operational procedures of the plant or substation, company’s operational, management of safety and health-related issues, contribution to the local community
2 Proposals for Institutional Arrangements to Propel the Implementation of Quality Electricity Infrastructure
13© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Issues (DOE’s expectations) Measures taken by the study teamCoal-fired thermal power plants are faced with facility troubles during peak periods.
Provided advise to PAA GU team regarding the points to look at for maintaining power plants in quality condition
Stable electricity is not provided at low cost. (to address those, would like to perform an effective auditing. Hence, would like to know how Japanese governments audit utility companies.)
Based on the internal auditing approach employedby Japanese utilities, provided inputs regarding the points to be focused for quality operation.
Some issues in power plants are very straight forward. Tube damage due to objects falling from the ceiling, the lack of spare parts supply chain with sufficient lead time
Provided basic concepts of power plant operation such as long-term service agreements (where the service provider is responsible for delivering spare parts on time)
Some power plants caused forced outages even afterPAA
Provided key items to look at for quality operation such as patrolling of power plants (frequency of patrol, number of personnel and requisite expertise of staff)
Issues in the Philippines Power Sector and Its Remedial Measures(1/2)
Through a series of discussions with DOE staff, the METI study team understood the current issues of the power sector and the status of PAA, and proposed the following measures to address those.
14© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Issues (DOE’s expectations) Measures taken by the study team
Lack of incentives for GENCOs to implement measures necessary to enhance the performance of their generating plants.(DOE is seeking to make a rating system for GENCOs, which is already in place for DUs. Would like to make an objective benchmark system for GENCOs)
Proposed a foundation of a benchmarking, grouping system
The power sector overall still need to be more efficient.(The incorporation of Japanese technologies for efficiency such as the smart grid is highly expected.)
Introduced measures that Japanese generators take for the efficient operation. Also, provided a checklist/questionnaire which can be used for Generation PAA.
Technical standards in the Philippines deviate from international standards, or are not adequate. Both the human resources for PAA and the technical capability of individual staff are not adequate, either.
Provided the information on the Japanese thermal power plant technical standards along with a lecture to DOE staff concerning them.
Issues in the Philippines Power Sector and Its Remedial Measures(1/2)
15© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Proposal for PAA in General (1/2)
Item Description
1 Importance of collecting and accumulating data
• Collect and accumulate operation data for longer periods• Collect data by unit (GENCOs)
2 The utilization of monthlydata submitted to DOE for benchmarking and grouping
• The data submitted by the GENCO to the DOE on a monthly basis should be utilized before onsite auditing.
• By utilizing the above data for benchmarking and grouping, PAA team will be able to make comparison between operators.
3 Follow up after the audit • Follow up interview and post auditing process after onsite audit to verify the progress of the improvements(6 month to 1 year can be indicative
• Provision of incentives when improvements are verified
4 Utilization of externalexperts
• Gaining extensive knowledge to provide complete remedial measures for utilities will require long time for the DOE staff. Therefore, DOE should fist focus on identifying the issues in the power plant and the parties capable of providing remedial measures such as consultants and OEMs.
One of the measures that DOE regards as priority for the enhancement of electric infrastructure quality is PAA.As strong request for the improvement of PAA was expressed by DOE, the current situation was analyzed and improvement measures were developed in cooperation with DOE staff.
16© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Item Description5 Sufficient time to prepare for
the audit• In the field of financial statements auditing, planning is regarded as
important. • It will also be beneficial for PAA to spend sufficient time to prepare
for the audit to enhance effectiveness and efficiency.
6 Recommendation to the ”Energy Efficiency Award”
• The good practice encountered through the PAA by GENCO and DUs can be referred to the DOE “Energy efficiency award”
7 Additional procedures when necessary
• In the field of financial statements auditing, when there is insufficient evidence to form a basis as an opinion, auditors ask for additional procedures. The same may be beneficial for PAA.
Proposal for PAA in General (2/2)
17© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Item Current situation Proposals
Number of DUs Number of DUs is over 140 Vast number of types (EC,
LGUOU, private entity and so on)
Time will be required to cover all DUs for the PAA
Narrowing down the number of DUs to be audited (possibly small ones first)
Differentiate PAA with the ERC audit
Assessment form The photographs inserted indicates the places to check, and is a good attempt.
Emergency Procedures mentioned.
For onsite inspections, DOE shall check the calibration of the voltage meters.
One indicative is to focus on emergency procedures to differentiate with ERC.
Especially, cooperation between small DUs to counteract typhoons and other calamities will be beneficial.
Proposal Regarding PAA of DUs (1/2)The below were proposed to DOE regarding PAA for DUs.
18© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Item Current situation Proposals
Report on PAA carriedout in the past
Data for SAIDI (System Average Interruption Duration Index) is not collected.
Continuous collection of data and accumulation is important.
SAIDI should be confirmed. Main KPI should be managed as a
trend over time.
Others DMC, which represented the technical arm of the ERC was terminated. Inspection role of the DMC is now done by ERC along with some of the personnel of DMC.
Emergency recovery procedures, Business continuity plan on wide area natural disasters can be confirmed through PAA
Responsibilities for power meteringLarge customers : NGCP, others︓DU
Metering and collecting electric fee are essential. NGCP’s metering business should be audited as well as DU’s one.
DU is responsible for rural electrification in its franchise. However, if the DU gives up electrification, responsibility of supplying electricity is transferred to private companies, QTPs or NPC
Segmentation of distribution companies by rural electrification is one concern
Proposal Regarding PAA of DUs (2/2)
19© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Trend is difficult to understand based on insufficient data⇒Larger volume of data facilitates understanding of the trend.Items that will become possible Analysis of capabilities based on actual operation record
⇒Understand the trend of aged degradation Quantitative evaluation of degradation Analysis of causes of degradation Recommending operation and schedule maintenance to
suppress aged degradation Comparison of performance pre/post maintenance
⇒Identification of the cause of heat rate decline, revise maintenance plan
Hea
t Rat
e / M
W e
tc.
Operation Time
Image of accumulated data
Maintenance
Maintenance
Maintenance
Aged degradation
Hea
t Rat
e / M
W e
tc.
Operation time
Image of insufficient data
Maintenance
Maintenance
Maintenance
Plant performance enhance?
Plant performance deteriorate?For auditing & evaluating, it is important to obtain and
accumulate multiple years of operation data to enable comparison.⇒Accumulating and managing the operation data (generated output, thermal efficiency, operated hours ) of generation and distribution facilities since COD (Commercial operation date) on a continuous basis.There by the cause of deterioration over the years and forced outages (trouble) can be grasped.
Proposal Regarding PAA of GUs (1/3)
20© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
By comparison, objectivity enhances
High performing operators (such as efficiency) becomes a benchmark
Propel competition between operators, a provide a chance for operators to rethink their operation for efficiency
Propel information exchange between operators Provide a reason to rethink countermeasures to
deterioration of facilities
Grouping enables objective comparison and evaluation possible
COD year (Under 5/10/15/20/25 years) Scale of generation (under10MW/50/100/over100MW) Type of generation (Conventional, Combined Cycle, Engine) Type of fuel (coal, oil, gas, hydro, RE) By area (Luzon, Visayas, Mindanao) , etc.
0
10
20
30
40
50
60
0 5 10 15 20 25 30
Hea
t Rat
e
Operation Year
GTCC
Oil
Coal
Diesel
Competition between GUs/DUs will be propelled
Stable operation by diagnosis and monitoring Adequate maintenance through accumulation of
operation data Enhancement of personnel Enhanced performance through rehabilitation and
renewal
ImageIncentives
・Awards
・Tax reduction
By comparison between plants after “grouping”, perform audits and interviews to plants that outstood in order to study the situation
Proposal Regarding PAA of GUs (2/3)
21© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1. Output (kW: sending end and power generating end)2. Annual generation volume(kWh/ year)3. Heat consumption rate (BTU/kWh)4. Heat rate (%)5. Plant factor (Comparison with output as of COD, such as
data in COC)6. Availability factor (actual service hours)*Grasp indications of trouble such s forced outages
Key metrics
Positive adjustments to the evaluation Training system to plant personnel Safety Control training and measures Quality control enhancement measures Environmental issues Service to the local community
*at the interview on site, identify measures taken by operators
Optional evaluation
Item AbstractOutput(kW)
・Net Output (sending end)・Gross Output (power generating end)⇒Grasp the power consumption within the plant by comparison
Heat Rate(BTU/kWh)
Amount of calorie in the fuel (BTU)consumed per generation unit 1kWh
ThermalEfficiency(%)
The ratio of generation volume and the calorie in the fuel(kWh*860)/(total kcal)×100
Utilization Rate(%)
Comparison between Average power generation and maximum generation Average generation output / rated output * 100
Load Factor(%)
The ratio of actual service hours to the hours that the facility is capable of operating(Hours of generation /hours of calendar:8760hr) * 100
More focus on items that aid quality operation to enhance the evaluation by DOE
Proposal Regarding PAA of GUs (2/3)
3 Assistance toward the Implementation of the Advanced Power Generation O&M Training Course in the Philippines
23© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Summary of the Training Course
Name Project for dissemination of APEC guideline for quality electric power infrastructure in the Philippines
Background・Purpose
The training course was based on the memorandum between METI and DOE signed onJune 2018 regarding cooperation activities to enhance the efficiency of the Philippinespower sector.The memorandum mentions identifying issues in the Philippines power sector and providing remedial measures based on experience of Japan, proposing institutional arrangements for the implementation of quality infrastructure, provide training to IPPs and DOE staff and to share the results of the diagnostics .
Contents of the training
• Release of steam turbine, summary of the assembly procedures, inspection and maintenance training video
• Evaluation of the remaining life, the mechanism of damage and its examples, boiler maintenance and enhancement techniques
• Simulation training course, demonstration and practice of boiler plant control• Introduction of boiler damage inspection, shortening scheduled maintenance, case
studies of equipment customization, site visit of factory
24© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Summary of the Support Provided
Period First 11th September – 14th September, 201811th-13th training, 14th site visitSecond 26th November – 29th November, 201826th-28th training, 29th site visit
Attendants Staff of IPPs in the Philippines and DOE (approximately 20 persons)
Place the Philippines (Alabang)
Summary • Preparation of entry form, requirement list• Preparation of invitation letter• Preparing the list of attendants• Contacting the attendants• Configuring the logistics with attendants• Coordinating with DOE• Opening remarks
4 Sharing the Results of the METI Model Plant Study and Diagnosis Projects in FY2017 with the Government of the Philippines
26© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Study and Diagnostics of Model Plant (Summary)
Purpose In order to implement the “The power sector action plan in the Philippines”, study the projects aiming to propose to the Philippines DOE taking into account the needs of the subject countries public and private sector.
Contents Propose to the Philippines projects to aid the generation efficiency (such as rehabilitation of existing power plants, IoT system), electrification rate(implementation of RE, distribution network) and other projects in line with the action plan.
Requirements
1. Necessity of the project 2.Collection and analysis of the data 3.Inspection of engineer required for implementation or renewal 4.Analysis of economical soundness 5.project management plan, schedule, 6.Develop and proposal of financing measures 7.Collection and analysis of data required for the financing 8. Estimation of the reduction of CO2 from consumption of energy 9.Other studies as necessary
Period Date of award – 31st January 2018
Introduced to the DOE the summary of the model plant study and diagnostics projects along with the list of projects.
27© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The Interview with Subject Company
Name Summary
Hydro power plant rehabilitation project
• Due to long period without any maintenance, water and oil leakage and degrading performance has been observed.
• By leaving the facilities damaged, accidents such as fire becomes more likely.
• Performance degradation due to lack of disassemble maintenance was inherent.
Coal fired-thermalpower plant and geothermal power plant rehabilitation project
• Concept of prevention measures are not familiar in the Philippines and the benefits of equipment renewal is not understood.
• Insufficient effort towards maintaining generation efficiency• The hurdle for the power plant differs by age and newer facilities require
higher performance
Performed an interview with companies that carried out the diagnosis project regarding the contents of the project, current situation. Based on the interview, the identified issues were aggregated and shared with DOE.
5 Procedures and Issues toward the Effective Utilization of the Long-Term Expert Dispatch Programs and Proposals to the Government of the Philippines
29© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Through this project, it turned out that DOE was eager to continuously receive assistance from Japan with respect to the following issues:
1. Auditing and assessment procedures and outcomes of PAA2. Developing a consolidated Mindoro Island master plan (for electricity)3. Developing measures to address electrification issues in specific rural areas
For 1. PAA and 2. Mindoro Island master plan above, DOE has expressed a strong interest for assistance from Japan. Coupled with the possibility that Japanese companies will be involved with relevant business, it is desirable that these two items would be carried out early. From 2020 onwards, continuous support to DOE and related agencies through long-term expert dispatch and technical assistance are possible, but in order to fulfil these assistance in an effective manner, the following issues still needs to be addressed.
Classification of Issues and Way Forward
Subjects to be addressed by the Philippines
Deciding the actual support related to actions taken by DOE to address the issues of the power sector, and request for assistance Identification of the matters that can be managed by the Philippine stakeholders
and the ones which will require assistance from Japan
Subjects to be addressed byJapan
Mobilizing appropriate assistance tools that match the interests of the Philippines Analysis of possible direct benefits (expansion of business in the Philippines,
exporting products, etc.) and indirect benefits (establishment of stabilized legal framework, etc.) to Japanese companies which might be obtained through addressing the interests of the Philippines
Selecting appropriate executing agencies/companies to implement the assistance reflecting the above analysis
31© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Field Study Schedule
Sun Mon Tue Wed Thu Fri Sat12/1
2 3 4 5 6 7 89 10 11 12 13 14 15
16 17 18 19 20 21 2223 24 25 26 27 28 2930 31 1/1 2 3 4 56 7 8 9 10 11 12
13 14 15 16 17 18 1920 21 22 23 24 25 2627 28 29 30 31 2/1 23 4 5 6 7 8 9
10 11 12 13 14 15 1617 18 19 20 21 22 2324 25 26 27 28 3/1 3/23 4 5 6 7 8 9
10 11 12 13 14 15 16
First
Second
Third
The schedule of the field study and the recommendations made are as follows.First: 3rd to 7th of December, Second: 15th 25th of January, Third: 12th to 22nd of February
32© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Field Study (December)
Date Interviewee Contents
4/12/2018 Rural Electrification Project manager
The Mindoro islands where Secretary expressed interest to electrification is a missionary area (Off grid)
Mindoro island has differing situations between the west and east, with varying electrification rates. As of now the two areas are not connected.
NPC still operates as both generator and transmission, and an independent system operator is being selected to address independence issues.
6/12/2018 Undersecretary The rising electricity price due to transmission congestion is a concern.
Wish to make the least benchmark clear for both GU and DU, and would like to implement a rating system for the GU.
The efficiency (support to enhancing the efficiency) of Japanese is highly expected.
33© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Date Interviewee Contents
18/1/2019 PAA team Proposed the use of the metrics used in the APEC Guideline for quality electric infrastructure. some metrics are redundant with the metrics already used, and the benefit of changing the metrics does not seem sound.
Study team will aim to enhance knowledge and expertise regarding electricity and auditing
1/21/2019 Assistant Director Confirmed the deliveries of the project and the meetings with DOE staff to be held.
Field Study (January 1/3)
34© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Field Study (January 2/3)
Date Interviewee Contents1/22/2019 Rural electrification team In EPIRA, the priority of parties to electrify unelectrified areas
are set. The EC in charge of the territory has the rights and obligations to electrify the area. When the EC in charge gives up the area, other private entities can invest in the electrification.
As 100% electrification has been mandated, DOE is propelling the give up of the areas that ECs do no have the intent of electrifying.
1/2/2/2019
Missionary electrification team
Mindoro island has 2 ECs on the east and west side. Many power plants are in the east side and supplying to the
west side is an issue. Bothe ECs have prepared a master plan towards
electrification.
35© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Field Study (January 3/3)
Date Interviewee Contents24/1/2019 PAA team (around 10
attendants)Provided the enhancement measures of PAA as an interim report Provided inputs to data PAA procedures. PAA not only collects information related to the performance
of plants, but also collects information regarding the management of the company.
The calculation method of metrics to be used for the PAA requires additional capacity building, and request Japan for further training.
36© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Field Study (February 1/2)
Date Interviewee Contents14/2/2019 22/2/2019Etc.
Missionary electrification team
Several meetings were held regarding the electrification of Mindoro. Each projects are expected to go forward, but it lacks a plan that assess the island as a whole. The Japanese government was requested to check the overall adequateness of the electrification plan.
37© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Field Study (February 2/2)
Date Interviewee Contents
21/2/2019 PAA team (around 10 attendants)
Provided enhancement measure of the PAA as a final report. Since PAA is a recent undertaking, knowledge building is on
its way. Financial statement auditing on the other hand has long history and know-how, and some aspects can be incorporated in to the PAA. METI team provided the basic concepts of F/S auditing.
Continuing from January, provided methods of benchmarking and grouping to evaluate high quality operation of power plants.
Document Classification: KPMG Confidential
© 2019 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
The contents in this report is based on general information, and does not pertain to the situation of individual persons or companies. We, KPMG AZSA LLC compiled this report with due professional care to present information in a timely manner, but the accuracy of the information as of and after the time of delivery is not subject to any assurance. Before taking actual actions, we recommend that this report alone should not be the basis of decisions, and to hire a professional to thoroughly study the situation. KPMG AZSA LLC bears no responsibilities to any third parties receiving this report.
Top Related