The National Energy Regulator (NERSA) has asked for public comment and will then assess Eskom’s application following due regulatory processes. Mass public participation is essential to influence NERSA’s decision (closes 20 Jan 2020). Scroll down to have your say.
112910 have had a say so far. Time remaining; 2020/01/20 23:59:59
As an extra measure, Energy Expert Ted Blom will present the public participation, along with his argument against the tariffs, at official hearings in all nine provinces (a timetable will be emailed to all participants).
Eskom’s RCA application for 2018/19 financial year – requesting a total of R27.323 billion – which will result in an additional 12 to 17% tariff hike – see summary below.
- Nersa initially allowed Eskom to recover R86 billion in costs from electricity tariffs, but Eskom maintains it was entitled to recover R99.6 billion, which it says was prudently incurred.
- The RCA methodology is a mechanism to mitigate the risk of assumptions underlying the original tariff determination for the period being at odds with how circumstances play out in reality. It allows the regulator to retrospectively adjust Eskom’s revenue by adjusting tariffs in subsequent years in favour of either Eskom or the consumer, to compensate for variances in, for example, sales volumes.
- Eskom proposes that the amount Nersa awards be added to electricity tariffs in 2020/21 and 2021/22.
- If Nersa awards Eskom the full R27.2 billion and splits it over two years, in 2021/22 and 2022/23, it will push the expected increase in April 2021 from 5.01% to 11.38%.
- Eskom is however challenging five different tariff determinations by Nersa in court, including the original 2018/19 decision, which has resulted in overall uncertainty about the future price path of electricity.
- The first applications are expected to be heard early next year. Eskom is arguing that Nersa shortchanged it by at least R100 billion and is asking the court to order the clawback of at least R69 billion.
- If the first, urgent, application succeeds, it could result in tariffs increasing by 16.6% next year, instead of the 8.1% as things currently stand.
- In the current application Eskom relies largely on lower-than-expected sales volumes and higher-than-expected coal costs in arguing for the clawback.
- After stripping out income lost due to lower sales that resulted from load shedding, Eskom is claiming an additional R5.4 billion due to reduced sales.
- Eskom is claiming R16.7 billion additional revenue for primary energy, mostly related to coal.
- The power utility is highly critical of Nersa’s decision to approve R39.1 billion coal burn cost, compared with the R48.6 billion it applied for and the ultimate actual cost of R51.5 billion.
- According to Eskom, Nersa did not take into account the current coal purchase agreements Eskom is bound to and based its determination on a theoretical index that also fails to take the dynamics in the coal industry into account.
- Eskom is further claiming R4.8 billion for variance in “other” costs, consisting largely of depreciation and employee costs.
- It states that the R24.3 billion Nersa allowed for employee costs provided for only 32 954 staff members.
- This meant Eskom would have had to reduce staff numbers by 6 323 within one month of the announcement of the decision.
- According to Eskom, the reasons Nersa provided for its tariff determination in some instances lack the necessary information to base its RCA application on. It hopes to get further guidance from the court.