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Eskom wants R27bn clawback from consumers

It’s asking for more from tariffs to cover the under-recovery of its actual costs in 2018/19, while subjecting consumers to crippling load shedding.

Energy regulator Nersa last week published Eskom’s application in terms of the Regulatory Clearing Account (RCA) methodology for public comment. Nersa initially allowed Eskom to recover R86 billion in costs from electricity tariffs, but Eskom maintains it was entitled to recover R99.6 billion, which it says was prudently incurred.

According to the published timelines, stakeholders have until January 20 to submit written responses to the applications. Nersa will also hold public hearings on the matter in all nine provinces during February and plans to announce its decision on March 24 next year.

The RCA methodology is a mechanism to mitigate the risk of assumptions underlying the original tariff determination for the period being at odds with how circumstances play out in reality. It allows the regulator to retrospectively adjust Eskom’s revenue by adjusting tariffs in subsequent years in favour of either Eskom or the consumer, to compensate for variances in, for example, sales volumes.

Read: Electricity: Who pays what 

This application is however not expected to impact electricity tariffs next year, since Nersa’s announcement will come too late to be incorporated in the upcoming tariff increase, which takes effect on April 1 for Eskom’s direct clients and July 1 for municipalities.

This is despite Eskom proposing that the amount Nersa awards be added to electricity tariffs in 2020/21 and 2021/22.

If Nersa awards Eskom the full R27.2 billion and splits it over two years, in 2021/22 and 2022/23, it will push the expected increase in April 2021 from 5.01% to 11.38%.

Eskom is however challenging five different tariff determinations by Nersa in court, including the original 2018/19 decision, which has resulted in overall uncertainty about the future price path of electricity.

The first applications are expected to be heard early next year. Eskom is arguing that Nersa shortchanged it by at least R100 billion and is asking the court to order the clawback of at least R69 billion.

If the first, urgent, application succeeds, it could result in tariffs increasing by 16.6% next year, instead of the 8.1% as things currently stand.

If Eskom’s other applications succeed, the court might refer the matters back to Nersa for redetermination, which would once again delay any price certainty.

In the current application Eskom relies largely on lower-than-expected sales volumes and higher-than-expected coal costs in arguing for the clawback.

After stripping out income lost due to lower sales that resulted from load shedding, Eskom is claiming an additional R5.4 billion due to reduced sales.

It blames this largely on the struggling economy. In its application, Eskom says the customer groups most affected are municipalities, mines and households.

The biggest impact at municipal level was in KwaZulu-Natal, where the closure of two furnaces by Richards Bay Alloys and downscaling by Karbochem cost Eskom 574 gigawatt hours (GWh) in sales.

In the mining industry sales reduced by 1 125 GWh, mostly in the gold sector and as a result of the Gupta-linked Optimum coal mine going into business rescue.

Eskom is claiming R16.7 billion additional revenue for primary energy, mostly related to coal.

‘Unreasonable’, says Eskom

The power utility is highly critical of Nersa’s decision to approve R39.1 billion coal burn cost, compared with the R48.6 billion it applied for and the ultimate actual cost of R51.5 billion.

According to Eskom, Nersa did not take into account the current coal purchase agreements Eskom is bound to and based its determination on a theoretical index that also fails to take the dynamics in the coal industry into account.

Eskom is further claiming R4.8 billion for variance in “other” costs, consisting largely of depreciation and employee costs.

It states that the R24.3 billion Nersa allowed for employee costs provided for only 32 954 staff members.

This meant Eskom would have had to reduce staff numbers by 6 323 within one month of the announcement of the decision.

Eskom is however bound by collective bargaining agreements and such a reduction would have required extensive and time-consuming negotiations with unions, as well as additional cost for severance packages, it argues.

The power utility criticises Nersa’s calculations with regard to employee costs and describes the amount determined as “unreasonable”.

According to Eskom, the reasons Nersa provided for its tariff determination in some instances lack the necessary information to base its RCA application on. It hopes to get further guidance from the court.

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Eskom my Love. Clawback the money that is owed to you by non paying municipalities. But you need to clawback about 500 billion from thin air as well. And that is not going to happen.

Even if Eskom tipple the cost of electricity it is not going to help.

They can get R20bn by collecting arrears in Soweto. Or, if that fails, just switch off the power there completely, thereby alleviating some of the pressure on the grid. Win-win situation for all.

Haiyibo, and what about us who pay in Soweto?

Why doesn’t Statistics South Africa do a study that would actual be in the public interest. One that gives us the percentage of Soweto residents that actually do pay their electricity bills. Their water and rates would be interesting too.

Klap your neighbour to force him to pay his bill, or sell your hose while you still can.

@Boombang, We refer to the Municipality that are not paying Eskom.

#Boombang, guess what, despite being on PRE-PAID our power still goes of, welcome to the real world where users pay their way.

Take all they can because that’s all the anc is good for. Taking and excuses.

You have to admire the size of Eskom’s, hmm, “courage” to try and slug us with cost recovery.

Presumably Eskom does a cost analysis and comes up with a budget of how much electricity it plans to generate and sell plus/minus contingencies. But then it institutes loadshedding which eats into its own sales, I mean you cannot sell electricity if shut down your own national grid, and the costs of running diesel turbines to reduce more loadshedding. Add to that all the illegal connections and municipalities that simply don’t pay the electricity bills.

This puts Eskom in a predicament. What does it do? It goes after *paying customers* by trying to slug paying customers with the cost of its own mismanagement, the cost of the freeloaders and the recalcitrant municipalities. Eskom is effectively telling the freeloaders that the paying customers will pick up the cost of “free electricity for all”. IF THAT is not a persuasive argument for getting out the abusive relationship with Eskom then I don’t know what is.

Eskom is tippling far too much already! Sober management is needed!

Why do some customers get away by not paying?
Either we all pay or do not pay.

Why is Eskom seeking to charge extra, when it is daily walking past people who are literally stealing electricity with illegal connections that out in the open (just drive past every township and squatter camp, there are ‘spider webs’ [illegal connections0 everywhere, and inzinyoka (illegal connectors) are even listed in the local ‘grapevine’ telephone book. C’mon now, I cas see how not collecting pleases ANC constituencies, but why should I pay more for political benefits to the ANC?!!!

The reason is the ANC is a corrupt organisation with corrupt members protecting each other.

The consumers pay more and more for incompetence, one of these days farting will be all that’s left inside the consumers, completely milked dry for so long.

Or alternatively, simply collect the R18 billion arrears from Soweto ?

I say it’s time that the public who pays taxes, electricity, rates etc follow the example of Soweto. I also want r100 electricity. Rioting is the only thing the anc understands

The money is gone, forever, no such luck, over & above Com-Rats are not going to antagonise their grass root voters.

Before implementing these tariffs, a few non-negotiables:

– first collect ALL outstanding arrears from Soweto and those municipalities that have not been paying for their services
– actively reduce staff numbers to reflect a streamlined utility better focussed on costs
– renegotiate the coal contracts with those coal mines that were Gupta linked with inflated prices for poor quality coal and stop exporting the good stuff to China
– allow households to push excess generated power back into the grid (at a fee) so as to assist and supplement the consumer with income

Only then can we have a better picture of what is this so called shortfall in actual costs.

There is a greater chance of me becoming president. Absolutely zero chance the anc will do anything. Paralyzed and inept. They will let everything collapse. It will be eye opening when we have no electricity, water, fuel for an extended period. May possibility see some unhappy citizens

Wow.

The worse Eskom performs, the less it sells so the more prices must rise to cover costs, so more businesses close down so it sells even less, and this kills the economy even more so it cannot reduce its bloated headcount in a diving economy, so the more prices rise, but it doesn’t get to recover all its costs so it does less maintenance, so the system keeps breaking down, so the more it must use deisel, so the more costs rise, so prices increase, businesses close and it sells less. So it goes to Nersa to ask for more money which closes more businesses and mines down so it sells less, so it needs another price increase while we get stage 4 loadshedding which kills growth, makes the rating agencies give junk status which pushes up the price of its unsustainable debt which forces Eskom to increase its prices even more.

People have called it a death spiral. Think that’s about it.

We should in full swing to install renewable energy and dump he coal systems as is being done in some European countries.
In the meantime, if Eskom wants any more money from my overstretched wallet, the can contact my accountant who will discuss Eskom’s financial needs. Look him up in the phone book. His name is Mr. Joe Moer.

Well said. Nando’s should include you in their advertising team.

I think it is time to stop paying ANY money to Any Government institution.

Is it called Tax revolt or just Gatvol Citizen revolt.

We are being robbed by the scum of the earth.

Agreed-Once 75% of Soweto s arrears is recovered, Eskom staff size halved, Police Generals halved we start paying over PAYE and VAT-Before that Nothing!

Monty Python has nothing on this lot!

The coal contracts are by and large corrupt.
How much of the headcount has been implemented.
They lost revenue because they sold less due to being unable to supply.

The revenue reduction is simply going to get worse. 500MW of behind the meter solar accounts for about 800GWh – more of a ‘loss’ than the two big projects in KZN that shut down. I am pretty sure there was far more than 500MW deployed last year. There will be more this year.

Eskom has to force the coal contracts to the table for a renegotiate. Given the past bribery and fraud, there are good grounds.

Faced with loss of volume in an industry with very little ability to improve variable margin, the rational response is to reduce fixed costs.

Clearly this is a case where the “clawback” needs to be done from those directors and senior managers who were at the helm of Eishkom during this period of decay…

ESKOM, I believe any & everybody with a managerial title has a cloud of corruption hanging about them, therefore guilty as charged until & unless he/she can prove otherwise.

We can debate this issue as loud as we want, till we “loudshed”our voices. We will not solve it, yet the solution is simple… For all private house-holds let’s go prepaid. Let business and institutions go post paid and we shall have peace.

Now how on earth do you think this will solve the problem?

No need to comment further. The Corrupt Eskom is simply corrupt from top to bottom.

Whoever creates these fantasies for public relations on behalf of Eskom should rather author a sequel to the next “Alice in wonderland”. From wet coal to miscalculations in generation costs, it’s hysterical!

If a non-fictional case were made it would be along the lines of Eskom doesn’t have the will to cut its numerous inefficiencies and is unable to collect remuneration from defaulting consumers and municipalities. Therefore it must increase the rates it charges of those customers who do pay!

Can someone explain to me why Joburg gets smashed with FOUR AND A HALF hours of blackouts while the rest of the country gets off with TWO? Why not make it 3 hours even across the board? Totally unfair.

Because we are hammered with 3x 2 1/2 hour sessions per 24 hour cycle.

And that is in the EC.

Increase the petrol price with R10-00 per liter. Then Eskom can be free for all. That is the only way every person pays.

Bugger off! Recover the billions from the municipalities and others (e.g. Soweto residents) who are not paying!

Well, I now have a gas geyser and gas hob. Next step is to do away with electricity altogether by using solar sources. If too expensive will consider small generator. My biggest concern is water and am making plans to recover Grey and rain water. Eskom lives in fairyland regarding their price increases

Henriques, using a generator for ongoing electricity supply is VERY expensive in terms of petrol. Solar PV panels have come down drastically in cost, and are an obvious answer in our (normally) sunny climate. Lithium battery costs are however still high, but I don’t recommend using deep cycle lead acid batteries. They have to be topped up with water every couple of months and mine after 4 1/2 years are now only delivering about 50% of previous output. Best bite the bullet and go lithium with a pure sine wave inverter.

The ANC is not in power. The ANC, is IN BUSINESS!

Pretty soon Eskom will be insisting on getting paid for electricity even though no one is buying from them anymore. Like a tax – very much like NHI. You will be taxed for not buying your healthcare or electricity from the ANC. ANC is NOT interested in politics. And it wants to be the primary service provider of every conceivable product and service under the sun….

Start with Soweto – only 10% of residents pay for their electricity.

At the rate that major businesses is getting off the grid They will pretty soon be able to shut down some of those troubling coal power plants in any event. Ford, BMW and Volkswagen the latest to announce major projects to become energy self-sufficient. Soon non-paying municipalities will be its only customers. Can’t wait for the day all these fat-cat thieves are standing on street corners begging for a job

These bastards have their offshore accounts stashed with all our money. They will all dissappear to have a vacation with their friends the guptas while we all die of starvation and epidemics

Municipal debt to Eskom has reached R25.1 billion. https://www.thesouthafrican.com/news/missing-cogta-minister-skips-scopa-briefing-for-municipal-eskom-debt/

Nkosazana Dlamini-Zuma, Minister of Cooperative Governance and Traditional (CoGTA) has missed a Standing Committee on Public Accounts (SCOPA), Dlamini-Zuma not only missed the meeting, but she also chairs the IMTT, During the two and a half years of its service, the IMTT has been tasked with reducing municipal debt to Eskom, however, it has been recorded that instead of decreasing the debt, it has increased by 257% from R9.8 billion to the gigantic R25.1 billion that it currently is. “If the Minister in charge of holding delinquent municipalities to account is evading accountability, how can we ever expect these municipalities to get their houses in order?” – ANC/Ramaphosa is Managing Our South Africa like a SPAZA Shop, What Else?

When will South Africans See More of This: Cause & Consequence – ACTION!!!
Ramaphosa fired Jiba in April, together with Senior prosecutor Lawrence Mrwebi after retired Constitutional Court Justice Yvonne Mokgoro recommended he sack them from the NPA, following an inquiry. The inquiry found neither of them “fit and proper to hold their respective offices”, according to a statement from the Presidency.

It’s time for Soweto and other municipalities to pay Eskom its due: Ramaphosa, (21 October 2019) but Hag-on aren’t they at Most ANC Municipalities, & if You/Eskom Threaten to Cut Supply, The Court Rules against You – Where-To-Now CR, “what happened to Hydro”, our rivers (Besides being Contaminated with Sewerage = ANC Dysfunctional Municipalities again), there are now, No Power Sources in Natal, (where there Used to be at least 4 Power Stations) the Natal rivers run into the Sea, contaminated with Salt Water, rivers like Tugela, Megeni, Mkomanzi, Mzimkulu, & Mzimvubu in Transkei, all start in the Drakensburg passing through Gorges where Hydro Electric Dams could be built, what of the Existing Dams: e.g. the Rural town of Albert Falls had power from the Mgeni, there was a similar unit on the Crocodile River near Barberton, these units are Very Cost effective, can contribute to the National Grid, don’t need a Dam, just a Fall/Slope in the Land. I’ve Built & Installed Water & Wind Electricity Generators in Rural Areas, and I also know where Oil was Drilled for & Found in the 1960’s during my 8 yrs service in the SADF, Its not Off-Shore, but Militarily & Strategically was shelved. So Many Opportunities for the Country, but This Government isn’t Looking, Don’t Care, and Don’t Know, Don’t want to Learn or Listen, “God Given, One Mouth & Two Ears”, not used in the correct Proportion. (All Talk No Listening = No Action too Scared of Kicking Ass of civil-Servants.

Once Eskom has been split up, if I was the distribution unit then I would push to cut out the munics completely from the Eskom side in any case, they could compete with Eskom if they wanted but they should be able to directly collect from customers.

In any case, Soweta et al is a part of the problem but they are not the problem, that is the two big elephants sitting around doing nothing but costing 450bn.

How about Eskom getting the non-payers to pay? How about fair pricing for everyone in the WHOLE country and not subsidise certain areas who don’t pay? What about actively prosecution abusers who don’t pay yet “share” their source? Let’s fix our beautiful country properly instead of overcharging the people who want to pay.

Eskom should be closed down and all the board members arrested as they are part of a organised criminal venture. Eskom is, well, inherently corrupt

Mmm somebody will have to pay. (a) it will be users in the form of higher tariffs – call it a clawback if you wish or (b) it will be the taxpayer in the form of bailouts and the interest payments on our ever increasing debt burden.

That is the choice. There is no option (c) – nobody pays…

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