Eskom’s ‘no’ to audit can cost big
UP TO R20BN A DAY: IF REGULATOR APPOINTS A TRIBUNAL
Electricity supplier questions energy body’s mandate and the standard against which it will do the audit.
Officials of the National Energy Regulator of South Africa (Nersa) last week told a meeting of its electricity subcommittee that Eskom is refusing to cooperate with an audit of its struggling generation fleet.
They recommended the establishment of a tribunal aimed at issuing Eskom with a compliance notice.
Such a tribunal has the power to impose a fine of R2 million or 10% of annual turnover per day as long as non-compliance continues. In the case of Eskom that would amount to R20 billion per day.
Eskom denies refusing an audit, but has serious questions about the standard against which Nersa will do the audit, as well as the regulator’s mandate in this case.
It proposed quarterly workshops where it would share information Nersa might request and is prepared to arrange “regular operational visits” to its power stations.
Nersa regulator members were not impressed with this offer and instructed officials to write to Eskom one more time.
Should Eskom persist with its current attitude, the officials have the green light to continue with the establishment of the tribunal provided for in the Electricity Regulation Act.
Nersa stated in the reasons for its fourth multi-year tariff determination (MYPD4) that it would embark on such an audit and presumably it could result in a further reduction of Eskom’s allowed revenue, recovered through electricity tariffs. Eskom had based its revenue application for 2019-20 to 202122 on the assumption of an energy availability factor (EAF) of 78% over all three years.
Before the determination was finalised it became clear that this was too high and Nersa reduced it to 71.5%, 72.5% and 73.5% in the three consecutive years.
In the current year to date the EAF is only 67.69% on average. During its meeting last week officials cited this underperformance as part of the reason the audit is essential.
At the time of the MYPD4 decision,
Image: Moneyweb Nersa said it would embark on an audit of Eskom’s coal-fired power stations to test the validity of the EAF assumption.
Early in August, it wrote to Eskom to notify it of the plans to implement this part of the decision.
Nersa indicated the audit would be done over a period of one year and would include the analysis of documents, workshops and visits to power stations.
Eskom said it is “very willing to allow Nersa to undertake audits on any licensee”. This is a reference to the licences Eskom holds, for generation, transmission and distribution of electricity.
“Audits need to be undertaken in accordance with a particular scope,” Eskom states. It then accuses Nersa of moving outside this prescribed framework.
“Eskom has requested Nersa to provide this information. However, Nersa then changed its mind and decided that it wishes to audit Eskom on progress in accordance with the assumptions in this MYPD4 decision,” it argues.
The correct mechanism to test assumptions underlying the revenue determination is the regulatory clearing account (RCA), Eskom says.
“Eskom has always provided Nersa with the variances in the performance from the assumption in the RCA process. These have been published for public consultation. Eskom will continue to do so.” – Moneyweb
Audit could result in reduction of Eskom’s revenue