The national energy regulator, Nersa, will decide in August whether Eskom’s electricity tariffs will be increased to allow it to recover about R67 billion related to under-recovery and over-expenditure in 2014/15, 2015/16 and 2016/17.
Whatever increase Nersa grants Eskom, the increased tariffs would only be implemented from April 1 2019, and might be recovered over more than one year.
This comes after Nersa in December granted Eskom a mere 5.23% tariff increase for 2018/19, instead of the 19.9% increase Eskom asked for.
If all three applications that are currently before Nersa are granted in full and implemented once-off next year, it would amount to an additional increase of 34%.
Nersa has now published the three applications on its website. The applications were made in terms of the Regulatory Clearing Account (RCA) methodology and Nersa has invited comments before March 23 this year.
The regulator will also hold public hearings in all provinces during May this year.
Eskom submitted its application for 2014/15 in May 2016 and claimed R19.1 billion additional revenue related to that year.
A total of R8.7 billion of that is related to lower than expected revenue due to a decrease in sales.
The balance relates to higher than expected costs for independent power producers (IPPs) supplying renewable energy and the cost of running its diesel-hungry open-cycle gas turbines (OCGTs).
The claim for OCGT costs was aligned with Nersa’s decision in the 2013/14 RCA when it only allowed what it would have cost Eskom to generate the same amount of electricity with its coal-fired power stations. Nersa at the time argued that the customers should not be made to pay for Eskom’s failure to keep its more cost-efficient power stations in running condition.
The RCA methodology does not allow Eskom to recover over-expenditure on operating expenditure and Eskom states that as a result, it had to absorb additional costs of R4.9 billion.
The 2015/16 RCA application, which was submitted to Nersa in July 2016, amounts to R23.6 billion of which R15.5 billion relates to under-recovery of revenue due to decreased electricity sales.
The balance is related to higher IPP costs and OCGT and other primary energy costs.
Eskom absorbed over-expenditure of R14 billion in operating expenses and R6.5 billion in OCGT costs.
For 2016/17, Eskom in July last year submitted an RCA claim of R23.8 billion of which R20 billion relates to lower revenue due to decreased sales.
It absorbed R15.3 billion over-expenditure on operating expenditure. A total of R3 billion of savings on coal burn, OCGTs and environmental levy were credited to clients and the net cost claimed amounted to R3.8 billion. This related to primary energy, international purchases and demand market participations, which is when Eskom compensated clients for lowering their demand against the background of a supply shortage.
Eskom is currently facing a severe and urgent liquidity crisis with funders refusing to release funds pending improvements of corporate governance.
The RCA determinations will not be made in time to alleviate Eskom’s immediate problems, but once funders are satisfied on that score, the RCA awards could strengthen Eskom’s balance sheet even before its implementation.
That could increase its access to much-needed funding after the RCA processes have been completed in August.
The RCA applications can be found at www.nersa.org.za > Invitation to comment.