Eskom submits supplementary tariff utility to Nersa

Eskom has submitted a R5.four billion supplementary tariff utility to vitality regulator Nersa, and for the primary time it has additionally included curiosity – to the tune of R1.three billion – within the utility.

This follows a excessive courtroom order made by Decide Jody Kollapen in March, that discovered Nersa’s willpower of Eskom’s tariffs for 2018/19 was irrational and unlawful. Kollapen set the willpower apart.

At that stage Eskom’s R27 billion Regulatory Clearing Account (RCA) utility was already earlier than the regulator.

The RCA is a risk-mitigating mechanism that gives for retrospective changes – in favour of both Eskom or shoppers – for income variations if assumptions underlying the income willpower play out in another way in actuality.

Kollapen ordered that Eskom would, after the finalisation of the RCA, be allowed to deliver a supplementary tariff utility, ought to it nonetheless be wanting the income it was entitled to if Nersa had made the preliminary resolution lawfully. He laid down sure rules to be adopted in deciding this utility.

Nersa slashed Eskom’s RCA utility to R13 billion.

The brand new utility

In its new utility Eskom says sure quantities it was entitled to, such because the R511 million it wished for demand aspect administration, it didn’t really spend and is subsequently now not included within the excellent quantities.

Different quantities have been disallowed, and Eskom had no possibility however to borrow.

Whereas the RCA makes no provision for the restoration of curiosity, Eskom argues that after the supplementary income has been decided, it must be compensated for the carrying value incurred because of Nersa’s illegal resolution. “Solely the curiosity value, at a price of 10% each year compounded yearly, is taken into account. The impact of inflation will not be included”, it states.

Additionally included within the utility is R2.four billion for worker value. This comes after Nersa primarily based its calculation of prudent worker value on Eskom’s technology perform solely, with out correct consideration of the enterprise mannequin that features transmission and distribution as properly.

Abstract of Eskom’s supplementary income utility:

Supply: Eskom

In its utility Eskom proposes that the R5.four billion be added to the R13 billion RCA steadiness and the full R18.four billion liquidated by means of elevated tariffs subsequent yr.

This, Moneyweb understands, will go a protracted solution to making certain that Eskom will get R23 billion further income subsequent yr, which interprets to a 15% common tariff enhance.

Nersa earlier accepted a 5.22% common enhance for subsequent yr.

Easy corrections

Nersa additional should nonetheless rethink three RCA choices for 2014/15, 2015/16 and 2016/17, and Eskom hopes that the steadiness to make up the R23 billion it needs could be discovered by merely correcting some apparent errors Nersa made when it first took these choices.

Throughout a gathering of Nersa’s electrical energy sub-committee final week, it was nonetheless clear that regulator members have been involved in regards to the influence of a 15% tariff enhance on shoppers nonetheless attempting to recuperate financially from the Covid-19 lockdown.

The assembly was involved in regards to the affordability for shoppers and mentioned tempering the tariff enhance by spreading the quantities over three years.

The committee nonetheless made it clear that these choices must be finalised earlier than March 15 subsequent yr, when Eskom should desk the majority tariffs it would cost municipalities within the new monetary yr in Parliament.

Correcting the previous mistake

Within the meantime Decide Fayeeza Kathree-Setiloane will on Friday hear an utility from Nersa for depart to enchantment her earlier ruling that it should add R23 billion to Eskom’s allowable income subsequent yr. That may be step one in correcting its illegal deduction of R69 billion from Eskom’s income for the three years 2019/20, 2020/21 and 2021/22 after the regulator learnt that authorities deliberate to help Eskom with fairness injections of R23 billion per yr over the identical interval.

Nersa argues that the courtroom ought to have referred the matter again to the regulator for reconsideration, because it did with a number of different illegal tariff choices.

If the enchantment course of is finalised in Eskom’s favour in time for subsequent yr’s tariff resolution, Eskom will restrict its expectation to the 15% enhance this can translate to and will probably be ready to defer the 2018/19 RCA and supplementary income quantities, Moneyweb understands.

That may nonetheless add as much as steep will increase in years to return.

Hearken to Nompu Siziba’s interview with vitality skilled Chris Yelland (or learn the transcript here):