Eskom RCA judgement flawed – Nersa

Recommendation to appeal setting aside of tariff increase.

In the above video Thembani Bukula, Nersa regulator member for electricity, talks about the recommendation the electricity subcommittee agreed upon on Wednesday, the process at Nersa going forward and more. 

The executive committee of energy regulator Nersa will on Thursday decide whether it will appeal the setting aside of an interim tariff increase it granted Eskom on March 1.

Nersa’s electricity sub-committee on Wednesday made the recommendation for Nersa to appeal on the basis of an internal report pointing to several flaws in the ruling, as well as a regulatory vacuum caused by the ruling.

Judge Cynthia Pretorius on August 16 granted an application by energy intensive users from Nelson Mandela Bay and the Nelson Mandela Bay Business Chamber. She reviewed, set aside and remitted the decision to Nersa, ordered that all future Eskom applications in terms of the Regulatory Clearing Account (RCA) be considered in compliance with the prescribed methodology.

The RCA keeps track of variations from budgeted sales and expenditure upon which Nersa earlier determined Eskom’s electricity tariffs. In certain circumstances tariffs may be adjusted to compensate Eskom for lower-than-expected sales and higher-than-expected expenditure.

She also ordered Eskom and Nersa to pay the costs of the application and an earlier urgent application.

The Nersa decision granted Eskom an additional R11.2 billion in revenue and saw its average tariff increase from 3.51% to 9.4%. The increase took effect on April 1 for Eskom’s direct customers and was passed on to municipal customers from July 1.

Nersa will give full detail of the grounds for its decision after the meeting tomorrow, but from the discussion it was clear that it found the remittance of the decision to the regulator problematic, since the mistakes made, could not be cured.

This includes the fact that Eskom failed to open the RCA at the beginning of 2013/14, the period to which the decision relates. Eskom further failed to submit quarterly reports during the period to Nersa about the variances. These quarterly reports should have been assessed by Nersa and made public as a regular pricing signal to consumers. Eskom further failed to submit the RCA application immediately after its audited financial statements for that year became available and only did so 27 months later.

Nersa’s internal report further pointed to what it labelled mistakes in the judgement, including a reference to the Independent Power Producer (IPP) Aggreko in relation to an additional R580 million granted to Eskom. According to Nersa the amount does not relate to Aggreko.

Thembani Bukula, Nersa regulator member for electricity confirmed that the current Eskom tariffs would remain in force if the regulator does indeed proceed with an appeal and until the appeal was finalised.

He further confirmed that Eskom has submitted two further RCA applications, relating to variations in 2014/15 and 2015/16.

Bukula said during both these periods Eskom also failed to submit quarterly reports as prescribed.

It is not clear how Nersa would deal with these applications if it proceeds with the appeal.

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