Eskom ‘hides bungling’
‘ABUSES COURT’: NERSA SPEAKS OUT ON BONUSES, OVEREXPENDITURE
Nomfundo Maseti says Eskom should take accountability for its own failings.
In a strongly worded affidavit, Nomfundo Maseti, the acting full-time member for electricity at the National Energy Regulator of SA (Nersa), has accused Eskom of abusing court process in its urgent court application to be heard next week.
According to Maseti, Eskom is hiding the true extent of its own inefficiencies and maladministration, which is the real reason for its financial destruction.
This includes providing R1.8 billion for performance bonuses over three years, overspending on maintenance with no clear benefit and borrowing to fund its spending rather than cutting costs.
Eskom accuses Nersa of causing its financial distress by consistently granting inadequate tariff increases.
But Eskom should take accountability for its own failings, Maseti argues.
Eskom is asking the High Court in Pretoria to review and set aside part of Nersa’s decision to limit its revenue from electricity tariffs for the period 2019/20 to 2021/22, the fourth multiyear price determination (MYPD4), and allow it to recover R69 billion additional revenue over the next two years.
The urgent part of the challenge is limited to the R69 billion that Nersa deducted from Eskom’s allowable revenue, in light of the equity injection of R23 billion that government promised the utility in each of the three years of the MYPD4 tariff period.
Eskom chief financial officer
Calib Cassim told the court in his founding affidavit that this move is irrational and should be reversed, or it will cause Eskom and the economy irreparable harm.
Eskom has indicated it will, at a later stage, also challenge the rest of the Nersa decision, but has not yet submitted court papers in this regard. It is, however, also challenging four more Nersa tariff decisions in two other applications that are set to be heard at the end of this month and the end of February, respectively.
If Eskom’s application succeeds next week, electricity prices will rise by about 16% this year and again next year, instead of 8.1% and 5.22% as Nersa determined.
In her affidavit, Maseti takes issue with Eskom’s approach. She says it is wrong to focus on one aspect of the tariff determination only and it should be viewed holistically, she argues. That is why she has raised the matter of Eskom’s planned bonuses, overexpenditure and failures in procurement.
“It came to Nersa’s attention,” Maseti says, “that Eskom indicated that it required incentive bonuses for the MYPD4 period amounting to R580 million, R598 million and R622 million for the 2019 to 2022 period.”
Maseti says this is within the control of management and can only be allowed when Eskom has achieved efficient operations and a healthy financial position.
Nersa has disallowed the provision for incentive bonuses, but that is part of the decision that Eskom is challenging.
Maseti says Nersa learnt about government’s equity injection when it was announced in parliament. This was despite an obligation on Eskom to disclose all relevant information when Nersa considers a tariff application.
The regulator determined that it would result in excess returns for Eskom. That would result in high tariffs that consumers would be unable to afford, she states.
In line with its legal obligation to balance the needs of Eskom, the economy and the consumer, Nersa used its discretion and deducted the R69 billion from Eskom’s allowable revenue. – Moneyweb