Tuesday, January 18

We want 20% more, says Eskom

Tension between Eskom and its regulator Nersa escalated on Wednesday after the regulator published a discussion paper on Eskom’s request for revenue.

In a statement issued just two hours later, Eskom accused Nersa of “misrepresenting” its request “to include various matters that are still under consideration by both the courts and Nersa herself.”

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Eskom CFO Calib Cassim has confirmed that Eskom has requested an average rate increase of 20.5% for the next financial year. The new rates will apply from April 1 next year for Eskom’s direct customers and from July 1 for municipalities.

This includes R14.4 billion in revenue in relation to insufficient recovery in previous years. Nersa has already finalized its decisions regarding the amount and timing of the recovery of these amounts.

Source: Eskom

According to the Nersa discussion paper, the total increase may amount to 54.35%, taking into account the additional amounts that Eskom requested as recoveries from previous years that Nersa has not yet determined, in addition to the 46 billion rand that are being considered by the Supreme Court of Appeals.

Source: Nersa

The higher court previously reviewed and overturned a decision by Nersa to deduct a total of R69 billion in government assistance to Eskom from Eskom’s allowable income.

Read: Court allows Eskom to recover R69bn in three years

In terms of a settlement, Eskom has received part of this amount, but most of it is still pending pending Nersa’s appeal against the higher court ruling.

A court date has not yet been set and it is doubtful that the case will be resolved before February 25 next year when Nersa must determine Eskom’s new rates, but the regulator has included this in its calculation of the possible rate increase.

‘Toxic’ relationship

Chris Yelland, managing editor of EE Business Intelligence, says Nersa is not acting in good faith.

He says that the relationship between Eskom and Nersa is toxic and that this is due to Nersa’s side.

Yelland is concerned that the Nersa board will simply approve the electricity subcommittee’s recommendations without properly questioning and understanding the impact.

Last week, Nersa burned his fingers for the umpteenth time when the high court granted a semi-urgent request from Eskom to force Nersa to process this rate request with respect to the next financial year in accordance with current regulations.

Read: Court orders Nersa to process Eskom’s fee request

Since January 1, 2017, Eskom has reviewed each and every one of Nersa’s tariff determinations.

The latest events follow Nersa on September 30 in rejecting Eskom’s application, which was submitted in early June.

Read: Nersa rejects Eskom plan, wants sustainable prices

The court rejected Nersa’s argument that the multi-year rate methodology had expired and that Eskom mistakenly used it to prepare its application.

Nersa had to acknowledge that it left a void by not fulfilling its mandate and preparing a new methodology on time.

It takes Eskom about nine months to prepare the complex application and Nersa typically takes about six months to process it before the legislated March 15 deadline to present the new rates in parliament.

Subsequently, the court ruled that the methodology does not expire until it is superseded. It ordered Nersa to process the application for the next financial year according to the existing methodology.

It also set a timeline, which forced Nersa to publish the Eskom app on Wednesday for stakeholder feedback.

The deadline for written stakeholder submissions is January 14 and after that, Nersa will hold virtual public hearings before making a decision.

From Nersa’s discussion paper, it appears that Nersa may deviate from the methodology the court ordered it to use.

“The court order did not appropriate or prohibit the powers of the Energy Regulator to exercise discretion when considering the application in which discretion may lie, deviating from parts of the methodology if the strict application results in an irrational and unreasonable result or exercises a balancing act if the outcome will make the decision unreasonable… ”says the discussion paper.

Such a deviation will require additional consultations within the already tight deadline.

While Nersa will only consider Eskom’s rate request for the next financial year, the utility company’s presentation for the subsequent two years is included in the published document.

Eskom wants 15.07% more in 2023/24 and a further increase of 10% in 2024/25.

Impact on consumers

The utility company has given the following indication of what the average increase could mean for different groups of consumers. The municipal rates in this table refer to the bulk rates that municipalities pay to Eskom. Each municipality must use Nersa’s final determination to calculate its own set of electricity rates to be paid by end users as of July 1.

Nersa must also approve those rates before they are implemented.

Source: Eskom


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