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‘Eskom is refusing generation audit’ – Nersa

Utility questions audit standard and regulator’s mandate.

Officials of energy regulator Nersa last week told a meeting of its electricity subcommittee that Eskom is refusing to cooperate with a Nersa audit of its struggling generation fleet.

They recommended the establishment of a tribunal aimed at issuing Eskom with a compliance notice. Such a tribunal has the power to impose a fine of R2 million or 10% of annual turnover per day as long as the non-compliance continues*. In the case of Eskom that would be R20 billion per day.

This comes as the country is hovering on the brink of load shedding, following one instance of late-night blackouts last week to prevent a total grid collapse. This is due to the poor performance of Eskom’s coal-fired power stations.

Eskom denies refusing an audit, but has serious questions about the standard against which Nersa will do the audit as well as the regulator’s mandate in this case. It nevertheless proposed quarterly workshops where it will share information Nersa might request and is prepared to arrange “regular operational visits” to its power stations.

Nersa regulator members were not impressed with this offer and instructed officials to write to Eskom one more time.

Should Eskom persist with its current attitude, the officials have the green light to continue with the establishment of the tribunal provided for in the Electricity Regulation Act.

Nersa stated in the reasons for its fourth multi-year tariff determination (MYPD4) that it would embark on such an audit and presumably it could result in a further reduction of Eskom’s allowed revenue, recovered through electricity tariffs.

This came after Eskom based its revenue application for 2019/20 to 2021/2022 on the assumption of an energy availability factor (EAF) of 78% over all three years. Before the determination was finalised it became clear that this was too high and Nersa reduced it to 71.5%, 72.5% and 73.5% in the three consecutive years.

‘Audit is essential’

In the current year to date the EAF is only 67.69% on average. During its meeting last week officials cited this underperformance as part of the reason the audit is essential.

At the time of the MYPD4 decision Nersa said it would embark on an audit of Eskom’s struggling coal-fired power stations to test the validity of the EAF assumption.

Early in August it wrote to Eskom to notify it of the plans to implement this part of the decision.

Nersa stated that the audit would be limited to the following key areas of management and performance:

  • The management of planned outages,
  • The management of unplanned outages (trips and forced shutdowns),
  • The management of partial load losses,
  • Coal management, and
  • The execution of the new build programme;

Nersa indicated that the audit would be done over a period of one year and would include the analysis of documents, workshops and visits to power stations.

Eskom in response to questions said it is “very willing to allow Nersa to undertake audits on any licensee”. This is a reference to the three licences Eskom holds, namely for generation, transmission and distribution of electricity.

Eskom said such audits are required in terms of legislation, and for generation it’s done to check compliance with its generation licence conditions, various grid code requirements and regulatory rules.

Agreement followed by accusation

“Audits need to be undertaken in accordance with a particular scope as is normal for any auditor,” Eskom states. It then accuses Nersa of moving outside of this prescribed framework.

“Eskom has requested Nersa to provide this information. However, Nersa then changed its mind and decided that it wishes to audit Eskom on progress in accordance with the assumptions in this MYPD 4 decision,” it argues.

The correct mechanism to test assumptions underlying the revenue determination is the regulatory clearing account (RCA), Eskom says. “Eskom has always provided Nersa with the variances in the performance from the assumption in the RCA process. These have been published for public consultation. Eskom will continue to do so.”

This is only the latest in a series of disputes between Eskom and Nersa, with Eskom having filed three different court applications to challenge five separate Nersa tariff decisions.

These are aimed at clawing back at least R100 billion of revenue Eskom believes it was wrongfully denied by the regulator.

The first, urgent, application – aimed at setting aside the part of Nersa’s MYPD4 to deduct the R69 billion of government assistance from Eskom’s return on assets – is set to be heard early in December.

If Eskom succeeds with this, electricity tariffs will increase by about 16% per year in the next two years, instead of around 8% in 2020/21 and 5% in 2021/22 as Nersa determined.

* The Electricity Regulation Act states:
(4) If the tribunal finds that the allegation contemplated in subsection (3) is correct it may impose a penalty of 10% of the annual turnover of the licensee or R2 000 000 (whichever is the higher amount) per day conimencing (sic) on the day of receipt of the notice contemplated in subsection (2). 

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It is difficult to have sympathy for either of these actors (“perpetrators” is perhaps a better word):

Nersa has never properly fulfilled its mandate and has been missing in action when it should have been disciplining and sanctioning the distribution licence holders (municipalities) who receive electricity from Eskom, on-sell it to consumers, but never pay a single cent of their Eskom bills.

Eskom itself is a prime example of what happens when socialists and thieves take over a once exemplary enterprise and dive it straight into the ground.
Oh, and needless to say, both Nersa and Eskom are staffed to the gunnels with deployed cadres of questionable, if any, capability.
There is no question that this is going to end in disaster for the country and the final destruction of the little that is left of manufacturing and any other electricity-dependent South African industry.

Just read up to the second paragraph.

A “possible” fine of R20 billion per day just demonstrates how stupid the whole lot has become. Clueless as to the value of money. Maybe a BIELJON has less value.

Here we have one arm of the state fighting with another arm of the state, while the poor emasculated, and emaciated taxpayer is sponsoring each party, and has to fund the brawl in the courts as well. This is a palace revolution! Luthuli House against Luthuli House, and then they tell us that they are fighting for unity!

This is a fight for the corrupt and rotten heart of the ANC, a fight for the right to loot. The fight between NERSA and ESKOM displays the levels of incompetence, dissent and disunity in the ANC, as well as the destruction that it causes to the economy.

When this type of fight breaks out in the schoolyard, it implies that the headmaster has left, or, if he is still there, that the children do not recognise his authority. They have no respect for the principal.

If anyone wants proof that Nersa is doing a rubbish job then look at Eskoms Rating… 6 steps below investment grade.

It’s too little too late.
The diseased bloated and souless Bull has left the abattoir long ago and has left destruction and famine in its path.

All these committees have given us Committee Fatigue and still no body has been held accountable…

Nersa = more red tape = strangulation of economic growth.

Gas regulations are positively draconian and whilst the Nersa staff appear knowledgeable the set of rules are ridiculous.

Please Mr President deal with Nersa in your red tape reduction strategy

Eskom should have been able to charge what it needs to be a going concern. In a landscape where anyone is permitted to generate electricity and distribute it. This would have released billions for alternatives energy generation and Eskom would either die or wake up.

“Needs” is the operative word. The financial mismanagement and alleged overstaffing when compared to industry standards, first needs to be resolved before they make any demands about what they need.

This response from Eskom is unbelievable. As a State Owned Entity, paid for by consumers(taxpayers) and supported financially by the fiscus (also taxpayers), its management and performance should be transparent to the public.
This secrecy and reluctance to have a generating audit is against all reasonable rights of those who are “forced” to pay its bills, to determine how their money is being spent. This is made all the more unacceptable when one takes into account the mismanagement and corruption that was allowed to fester in the organisation over the past decades.
It makes one wonder what other skeletons are in their cupboards.

Two adjectives come to mind. Both are applicable to both Eskom and Nersa:
– Incompetent
– Juvenile.

Before you guys write off NERSA, consider that it is the only thing that stands between you and Eskom and your council doing WETFITWT.

what ever the …… want to

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