Fears of a 30% tariff increase allayed

POWER utility Eskom tried to allay fears that its regulatory clearing account application would lead to a 30% tariff increase when it presented its case to recover costs already spent in the provision of electricity.

Public hearings into Eskom’s application to make up for revenue variances, kicked off in Cape Town yesterday and are set to take place across the country over the next three weeks.

Eskom is trying to recoup R66.6 billion through its regulatory clearing account (RCA) applications to the National Energy Regulator of South Africa (Nersa).

The RCA is a regulatory mechanism which allows Eskom to make up for the over or under recovery of costs, as the multi-year tariff adjustments are based on forecasts.

Phakamani Hadebe, Eskom’s interim group chief executive, said the company’s sustainability depended on a sound regulatory environment that is aligned with existing Nersa rules and other legislative requirements.

“We therefore rely on Nersa to review our application in line with the multi-year price determination (MYPD3) methodology, which is a globally-accepted regulatory principle that reconciles variances between the projected and actual revenue and costs that Eskom incurred for certain elements,” Hadebe said.

“We have spent the money in the implementation of our mandate of providing electricity to South Africans by raising debt, as it was not included in the revenue decision, and need to repay those loans accordingly in order to ensure credibility with our lenders.”

Hadebe said that Eskom’s application only covers costs that were incurred efficiently and prudently, as allowed by the RCA mechanism.

“It is therefore important to note that Eskom is on a path of recovery on governance issues,” he said.

Calib Cassim, acting chief financial officer, said that Eskom was not expecting a once-off adjustment, but rather a phasing-in of the liquidation over a few years.