En­ergy Reg­u­la­tor: Eskom seeks to claw back higher costs

Nersa con­firms ap­pli­ca­tions

The Star Early Edition - - LIFESTYLE - Siseko Njobeni

THE NA­TIONAL En­ergy Reg­u­la­tor of South Africa (Nersa) has con­firmed Eskom’s sub­mis­sion of so-called reg­u­la­tory clear­ing ac­count (RCA) ap­pli­ca­tions for the 2014/15 and 2015/2016 fi­nan­cial years.

Nersa said it was study­ing the judg­ment but con­firmed that it had al­ready re­ceived Eskom’s RCA ap­pli­ca­tions for 2014/15 and 2015/16 which had been put on hold pend­ing the out­come of the ap­peal.

“The en­ergy reg­u­la­tor will now de­cide on the way for­ward re­gard­ing these ap­pli­ca­tions,” Nersa said in a state­ment.

Eskom was, how­ever, coy about the amounts it wanted to claw back through the RCA process.

The multi year price de­ter­mi­na­tion (MYPD) method­ol­ogy, which Nersa uses to de­ter­mine Eskom’s tar­iffs, al­lows for Eskom, af­ter fi­nan­cial year-end, to sub­mit an RCA ap­pli­ca­tion based on au­dited fi­nan­cial state­ments.

Ac­cord­ing to Eskom, the RCA is a back­ward-look­ing mech­a­nism that seeks to rec­on­cile what Nersa awarded Eskom on the ba­sis of what was fore­cast in the MYPD and what ma­te­ri­alised, as re­flected in the util­ity’s fi­nan­cial state­ments.

In Au­gust last year, the North Gaut­eng High Court set aside a Nersa de­ci­sion to grant Eskom a 9.4 per­cent elec­tric­ity tar­iff hike for 2016, af­ter Eskom’s RCA ap­pli­ca­tion for the 2013/14 fi­nan­cial year.

But the Supreme Court of Ap­peal last week up­held Nersa’s ap­peal of the high court de­ci­sion, pav­ing the way for Eskom to claw back some of its costs for the 2014/15 and 2015/16 fi­nan­cial years.

Un­til the suc­cess­ful ap­peal of the mat­ter, the High Court de­ci­sion had thrown the en­tire RCA process into doubt. Nersa had said that the court case might re­sult in a cash flow risk to Eskom and could ul­ti­mately af­fect the util­ity’s fi­nan­cial sus­tain­abil­ity.

“Now that the ap­peal is suc­cess­ful, and if there are no fur­ther ap­peals, Eskom will await guid­ance from Nersa in ac­cor­dance with the de­ci­sion. It is en­vis­aged that a sim­i­lar trans­par­ent pub­lic process will be fol­lowed. Thus it is a Nersa process – not an Eskom process,” Eskom said in a state­ment yes­ter­day. For the 2013/14 RCA ap­pli­ca­tion, Nersa held pub­lic hear­ings in dif­fer­ent prov­inces to so­licit com­ments.

Eskom’s to­tal costs in a given year in­clude pri­mary en­ergy costs, costs associated with in­de­pen­dent power pro­duc­ers (IPPs), op­er­at­ing costs, in­te­grated de­mand man­age­ment (IDM) costs and de­pre­ci­a­tion. Ac­cord­ing to a Nersa de­ci­sion for Eskom’s rev­enue and price ad­just­ment in the cur­rent fi­nan­cial year (2017/18), IPP costs amounted to al­most R23 bil­lion which the reg­u­la­tor said would be enough to en­able Eskom to con­tinue pur­chas­ing power from IPPs.

Un­der the MYPD method­ol­ogy, IPP costs are al­lowed as a so-called pass through be­cause IPP costs which Eskom in­curred in that year, pro­vided this was done pru­dently, would be re­im­bursed fully on ap­pli­ca­tion through the RCA process.

Nersa ear­lier this year granted Eskom a 2.2 per­cent tar­iff in­crease with ef­fect from April 1 this year. The reg­u­la­tor said the 2.2 per­cent tar­iff hike in­cluded all the IPP cost al­lowances. As more IPP power pur­chase agree­ments were en­tered into, these would be dealt with through the RCA process.

Eskom is em­broiled in a stand-off with the re­new­able en­ergy in­dus­try over its re­fusal to sign power pur­chase agree­ments with 37 IPPs. Eskom is the des­ig­nated buyer of IPP power in South Africa.

Now that the ap­peal is suc­cess­ful, and if there are no fur­ther ap­peals, Eskom will await guid­ance from Nersa


Nersa says it has re­ceived Eskom’s reg­u­la­tory clear­ing ac­count (RCA) ap­pli­ca­tions for 2014/2015 and 2015/2016. These were put on hold pend­ing the out­come of Nersa’s ap­peal of the High Court de­ci­sion on RCA.

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