Eskom constantly falling short, says regulator

Eskom has perpetually failed to collect the revenues allowed by the National Energy Regulator of SA (Nersa), while its expenditure has continued to exceed that determined by the regulator, Nersa says.

Nersa officials briefed Parliament’s energy portfolio committee on Tuesday on Eskom’s revenue application for 2018-19. They noted that over the past four years, Eskom had not been able to recover the revenue allowed by Nersa. In 2013-14, the shortfall in revenue collected as against revenue approved was 7,8%, in 2014-15 10,6%, in 201516 9,5% and in 2016-17; 10,8%.

“Although Eskom has been experiencing constraints in revenue collection, their costs have been increasing by an annual average of 16%. Eskom’s biggest cost overruns have been on their capital expenditures.”

Eskom applied for a 19.9% tariff increase based on expected revenues of R220bn but Nersa approved a 5.23% hike on expected revenue of R190bn. The regulator allowed expenditure of R51bn as against the R62bn proposed by Eskom.

“Nersa is of the view that Eskom needs to control its costs better,” Nersa officials said. They noted that while electricity tariffs had increased, consumption had declined partly because of affordability limits having been reached in a depressed economic environment.

“In order to break the vicious cycle, Eskom needs to reduce its costs (including its fixed-cost base) and hence its allowable revenue requirement while growing its sales volumes, thereby driving its tariffs to their most efficient level.

“This should result in smaller tariff increases that will attract additional sales volumes, that will result in even smaller tariff increases going forward and even higher sales volumes and so on, allowing (Eskom) to transition to a virtuous cycle, which is the desired future state.”