Energy Regulator: Eskom seeks to claw back higher costs
Nersa confirms applications
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