The National Energy Regulator of SA (Nersa) said on Thursday Eskom’s tariff increase for 2017-18 would be limited to 2.2% when the new prices come into effect on April 1.
The decision is based upon methodology applied by Nersa which has a complex five-year tariff system informed by what it considers “allowable revenue”.
As Eskom is able to make corrections over the five years to recoup additional revenue it can demonstrate it is entitled to over and above the agreed 8% tariff increase, the reconciliation over the five years now only allows for 2.2% in 2017-18, Nersa said. The coming year is the last of the five-year period.
The result is that Eskom will face a revenue shortfall for the coming year as the budget for the period would have assumed an 8% tariff increase, which is the approved tariff each year over the period.
Nersa said in a statement on Thursday that the decision was a confirmation of the determination of allowable revenue, which was made in February 2013. It was therefore not a new decision-making process.
The regulator had, however, invited Eskom to submit a new multi-year determination as it was mindful of the effect this would have on revenue.
Eskom had not done so and Nersa said it could still approach it further down the line.
Eskom spokesman Khulu Phasiwe said the utility was still studying the decision and would decide at a later point what it would do.
“Eskom is considering these decisions and after consultation with various stakeholders will decide on how best to implement the Nersa board decision,” Phasiwe said.
It could decide to make a new tariff application.
A further complication, and one that has influenced Eskom’s decision not to make a new application now, was a court judgment last August in which the mechanism through which Eskom recovers retrospective revenue — the regulatory clearing account (RCA) mechanism — was thrown into doubt.
Judge Cynthia Pretorius ruled that Eskom’s last RCA application was invalid as Nersa had not followed the proper procedures.
The application had allowed for Eskom to charge customers a 9.4% increase from April 1 2016. The court said because procedure had not been followed in terms of the 8% increase and the reconciliation Eskom could charge only 3.4%.
Nersa has appealed against the order and put it in abeyance. But, Nersa is now reluctant to process any more applications through the RCA mechanism until it has clarity on the process. In its statement issued on Thursday, Nersa noted that the R205bn of allowable revenue for Eskom included R23bn for purchases from independent power producers.
This means Eskom passes on the cost of renewable energy generation, which it is obliged to purchase regardless of whether it is required, to consumers.
Eskom has been at odds with the Department of Energy
over independent power producers, which has resulted in the utility having an oversupply of energy.
President Jacob Zuma said in his state of the nation address two weeks ago that the impasse was over and that Eskom was ready to sign.
Credit: Business Day