THE ASSAM GAZETTE

EXTRAORDINARY

PUBLISHED BY THE AUTHORITY

No.167 Dispur, Tuesday, 10th April, 2012, 21st Chaitra, 1934 (S.E.)

GOVERNMENT OF ASSAM

ORDERS BY THE GOVERNOR

ASSAM ELECTRICITY REGULATORY COMMISSION

COMPLIANCE AUDIT REGULATIONS, 2012

NOTIFICATION

The 31st March, 2012

No.AERC.27/2012/ – In exercise of the powers conferred under section 181 of the Electricity Act, 2003 (36 of 2003) and all the powers enabling it in that behalf, the Assam Electricity Regulatory Commission hereby makes the following Regulations:-

REGULATIONS

1. Short Title, extent and Commencement

• 1.1. These Regulations may be called the “Assam Electricity Regulatory Commission (Compliance Audit) Regulations, 2012”.
• 1.2. These Regulations shall extend to the whole of the State of Assam
• 1.3. These Regulations shall come into force from the date of their publication in the official Gazette of the Government of Assam.

2. Introduction

The Forum of Regulators has prescribed Regulations on Compliance Audit of Regulated Entities for verifying their compliance with the Electricity Act, 2003 and Regulations made there under. Accordingly, these Regulations have been framed.

3. Definitions

• 3.1 In these Regulations, unless the context otherwise requires –

  • (a) “Act” means the Electricity Act, 2003 (36 of 2003);

• (b) "Regulated Entity" means Distribution Licensee or Generation Company or Transmission Licensee or Trading Licensee or State Load Despatch Centre;

• 3.2 Words and expressions used and not defined in these Regulations but defined in the Act shall have the meanings assigned to them in the Act ; expressions used herein but not specifically defined in these regulations or in the Act but defined under any law, passed by a competent legislature and applicable to the electricity industry in the State shall have the meaning assigned to them in such law; expressions used herein but not specifically defined in the regulations or in the Act or any law passed by a competent legislature shall have the meaning as is generally assigned to them in the electricity industry.

4. Compliance Audits

• 4.1. The Commission may, at any time, conduct audit of Regulated Entity for verifying their compliance with the Act, Rules, Regulations made thereunder, orders and directions issued by the Commission.
• 4.2. The Commission may, by order, empanel Consultants / Auditors required to assist the Commission in the discharge of these functions on the terms and conditions as deemed fit.
• 4.3. The Commission may either appoint Consultants/ Auditors empanelled with it for an audit or go through the process of fresh selection, if required for a specific need.
• 4.4. The Commission may also consider the single source selection of Consultants/Auditors in exceptional cases where it is appropriate.
• 4.5. The Commission, before initiating an audit, will frame the Terms of Reference which will detail out the specific outputs that are to be provided by the Consultant/Auditor in relation to the task, the timeframe in which the task has to be completed and other terms relevant to the task.
• 4.6. The Commission shall assign, through an Order, the specific task of audit to the Consultant / Auditor based on the Terms of Reference framed by it before the audit of the Regulated Entity starts.

5. Requirement of Consultant /Auditor

Consultants / Auditors shall provide professional, objective and impartial advice and at all times hold the Commission's interests paramount, without any consideration for future work, and that in providing advice they avoid conflicts with other assignments and their own corporate interests. Consultants / Auditors shall not be hired for any assignment that would be in conflict with their prior or current obligations to other clients, or that may place them in a position of being unable to carry out the assignment in the best interest of the Commission. Without limitation on the generality of the foregoing, Consultants / Auditors shall be engaged keeping in view the circumstances set forth below:

• (i) A Consultant or an Auditor engaged for a particular audit must not hold office or have a commercial or any other interest in the Regulated Entity for a period of two (2) years preceding the engagement by the Commission.

• (ii) While conducting an audit, the Consultant or Auditor would be expected to do so honestly, fairly, professionally, independently and objectively and exercise a standard of skill, care and diligence that would be reasonable to expect of a person who is skilled, and who has substantial experience, in the provision of services the same as or similar to those to be provided by the Auditor.

• (iii) The selected Consultant or Auditor would be required to provide a written declaration to the Commission that he has no conflict of interest while performing the tasks and functions assigned to him under these Regulations nor by its nature, may be in conflict with another assignment of the Consultant or Auditor.

• (iv) Depending upon the requirement of the specific task, the Commission may specify minimum educational qualification of the Consultant / Auditor.

Consultant / Auditor may be a firm or a person with qualification of CA/ICWA/MBA (Finance) if the task deals with financial aspects or minimum qualification could be LLB, if the task deals with legal aspects or the minimum qualification could be specified as BE (Electrical) / BE (Mechanical) if the task deals with the Electricity related issues or BE (Computer) / IT if the task deals with the information technology. In all cases minimum 10 years experience in the relative field shall be necessary.

• (v) The remuneration / fee payable to the Consultant / Auditor may be specified by the Commission in the Terms of Reference separately.

6. Expenses

• (i) All expenses of, and incidental to, any audit made under these Regulations shall be paid by the Commission and thereafter such expenses shall be defrayed by the Regulated Entity in favour of the Commission within a month.
• (ii) The Regulated Entity shall be permitted to claim the said expenses as follows –
• Distribution Licensees may claim the said expenses as pass through in Aggregate Revenue Requirement;
  • Generation Companies or Transmission Licensees may claim the said expenses while filing application for determination of tariff;
  • Trading Licensees may claim the said expenses as increase in trading margin with the approval of Commission; and
  • State Load Despatch Centre may claim the said expenses as pass through in its annual budget approval.

7. Methodology

• 7.1. The Consultant / Auditor may, at any time, and shall, on being directed so to do by the Commission, cause an inspection to be made, by one or more of his Officers, of any Regulated Entity and his books of account, registers and other documents in its custody, and to investigate into the affairs of the Regulated Entity in a manner as deemed fit by the Commission:

Provided that the Regulated Entity shall be given a reasonable advance notice not less than 15 days in writing of such inspection and / or investigation.

• 7.2. It shall be the duty of every Regulated Entity, to produce before the Consultant Auditor, all such books of account, registers and other documents and to furnish him with any statement and information relating to the affairs of the Regulated Entity, as the said Consultant / Auditor may require of him within such time as the said Consultant / Auditor may intimate in writing in this behalf.

• 7.3. The Consultant / Auditor shall collect sufficient amount of evidence to document the work performed and to serve as the basis for the conclusions reached during the course of the audit. The information gathered will be generally through:

• Data Requests - The primary method of obtaining data shall be through data requests to the concerned Regulated Entity. The data obtained through data requests could include financial and operational information, procedures manuals, organization charts, reports, email and voice mail records, and studies. The data may be obtained either electronically or as paper documents (depending upon the requirement).

  • Site Visits – The Consultant / Auditor shall conduct Site visits to ensure accurate interpretation of the information provided by the concerned Regulated Entity. The Consultant / Auditor shall inter alia collect materials on-site, observe processes, and offer an opportunity to conduct face-to-face interviews, as relevant to the audit.
  • Interviews – The Consultant / Auditor may conduct interviews in person and over the phone.

• d) As the data are collected from the Regulated Entity under audit, the Consultant / Auditor shall compile and analyze the data. The Consultant / Auditor shall analyze information gathered from multiple sources, including filings made before the Commission by such Regulated Entity, as well as from public records. Advanced analysis may require the creation of complex spreadsheets and databases, and the use of sampling to test for potential non-compliance of the Act, Rules, Regulations made thereunder, orders and directions issued by the Commission.

  • e) Third party complaints - Areas of non-compliance may also be identified through third party complaints, for example, customer complaints, reports, etc.

• 7.4. The Consultant / Auditor will be required to provide full reports to the Commission, which shall contain, as a minimum:

• a) a description of the reporting scope and methodology, which should include all matters specified in the Terms of Reference;

  • b) a description of the systems and procedures that have been established to comply with regulatory obligations, including the identification of relevant documentation and responsible positions;
  • c) a discussion of how compliance is managed, addressing generic compliance issues and any specific issues identified for that report;
  • d) details of any non-compliance identified and the actions being undertaken by the Regulated Entity to rectify them, and an assessment of the adequacy of the actions.

• 7.5. The report shall include a statement, signed by the Auditor, which states that:

• a) the Terms of Reference have been complied with by the Consultant / Auditor in making findings and in preparing the report; and

  • b) the report reflects the professional opinion of the Auditor.

• 7.6. The Consultant / Auditor shall supply to the Regulated Entity a copy of his report.

• 8.** On receipt of any report under these Regulations, the Commission may, after giving such opportunity to the Regulated Entity, to make a representation in connection with the report as in the opinion of the Commission, seems reasonable, by order in writing take appropriate action under the Act on being satisfied regarding the non-compliance or contravention, as the case may be.

• 1. Power to remove difficulties**

• If any difficulty arises in giving effect to any of the provisions of these regulations, the Commission may, by general or special order, take suitable action, not being inconsistent with the Act, which appears to the Commission to be necessary or expedient for the purpose of removing the difficulties.

• 1. Power to amend**

• The Commission may at any time, amend any provisions of these Regulations.

• 1. Orders and practice directions**

• Subject to the provisions of the Act, the Commission may from time to time issue orders, and practice directions in regard to the implementation of these Regulations.

(By order of the Commission)

GAURI REGON,
Secretary,
Assam Electricity Regulatory Commission,
Guwahati