Eskom unhappy with Nersa’s straitjacket

ELECTRICITY price increases in the past two years had exerted enormous pressure on Eskom’s sustainability, liquidity and ability to provide electricity, the power utility told the parliamentary committee on energy yesterday.

Eskom questioned the National Energy Regulator of South Africa’s (Nersa) decision to grant it a 5.23 percent tariff increase for the 2018/19 financial year, charging that it was still awaiting the regulator’s detailed workings, models and basis for reasons for its decision.

Eskom said that the decision to grant it a total allowable revenue of R190 billion for the 2018/19 year – against its application for R219.5bn – was also inadequate.

“The price increase of 5.3 percent for 2018/19 covers the growth in independent power producers (IPPs), which equates to a 3 percent price increase for IPP costs alone. Hence, Eskom’s own costs and returns receive a total of 2.3 percent from the 5.3 percent price rise,” Eskom said.

The utility said it saved more than R47bn over the first four years of the Multi-year Price Determination (MYPD) against the budget. It said Nersa’s decision was in contravention of the Electricity Regulation Act, and the methodology that is used to assess its applications for revenue needs.

It also questioned Nersa’s claim that it had 6 232 excess employees that cost the utility about R3.8bn.

It said the MYPD methodology required that expenses forecast would be based on the most recent prudently incurred costs. “Nersa applied a reduction in headcount based on 2008 power sent out, versus 2019 estimated power sent out.”

Eskom said Nersa did not consider increases in customers, new build operations and change in business model.

Eskom’s installed capacity was 43 037MW in 2007/08 compared to 46 407MW in 2016/17, while electricity sales dipped from 224 366 Gigawatt hours (GW/h) in 2006/07 to 214 121GW/h in 2016/17.

Meanwhile, there is a highlevel discussion between the departments of energy, public enterprises and the National Treasury on various mechanisms to ensure Eskom’s financial sustainability.

Board member Nelisiwe Magubane said that the board was confident of returning Eskom to financial stability and sustainability.

“The board has… spent the first two months looking into inculcating a culture of effective and transparent governance, including, but not limited to, ensuring that those who were engaged in fraudulent activities are brought to account,” said Magubane.