Wednesday, January 19

Does Eskom get 20% more or 40%?


Interested parties have until Friday (January 14) to submit written comments to energy regulator Nersa on Eskom’s rates that may increase by more than 40%, based on Nersa’s latest pro forma implementation plans.

The following week, Nersa will hold virtual public hearings for various provinces.

Eskom previously objected to Nersa’s initial position, as reflected in the consultation document on which stakeholders were asked to comment, that the increase may amount to 54.35%.

The utility company said in a statement issued on December 8, shortly after the consultation document was issued: “Nersa has misrepresented Eskom’s request for revenue to include various matters that are still under consideration by both the courts and by Nersa herself “.

Read:

Nersa proposes a complete overhaul of Eskom’s pricing
Nersa’s plan would make households pay much more, says Eskom

Eskom CFO Calib Cassim stated that Eskom has requested a 20.5% electricity price increase for fiscal year 2023, which begins April 1, 2022.

Two scenarios

Nersa’s latest pro forma implementation plans show two scenarios, with an average increase for standard clients of 40.38% or 41.18%, depending on whether the regulatory compensation account balance of R3,461 million arising of the 2019/20 rate year is recovered in one or two years.

Recovered more than a year

Recovered for two years

Standard customers include most advanced users, except for the very limited number of large users who have special price agreements with Eskom, international customers, and end users who buy from municipalities and some other authorized distributors.

However, these end-users will feel the pressure indirectly as the increase in Eskom’s wholesale purchase price is passed on to them.

Starting point and differences

Both the Eskom and Nersa scenarios take as a starting point the total allowable income that Eskom requests in the next financial year, as of April 1. Eskom has requested R261.8 billion from standard customers. Including other customers, the amount rises to R 279 billion.

It should be noted that it is by no means a given that Eskom will get everything it is asking for.

The big difference between the calculations of the two parties is that Eskom only included the amounts to be recovered in terms of the Regulatory Compensation Account (RCA) methodology, which Nersa has already approved both in quantitative terms and in terms of the time of settlement. . her.

Therefore, Eskom adds “only” R14.4 billion, while Nersa initially added R28.1 billion, including the R3.4 billion related to 2019/20 that Nersa has determined after Eskom submitted its application, but for which the settlement period has not yet ended. has been determined.

The last two Nersa scenarios foresee the recovery of R3.4 billion in one or two years.

Nersa has the discretion to recover this amount over more than one tariff year and has often done so in the past.

Recover

It also included R10.7 billion related to 2020/21 that Eskom requested as a recovery. Nersa just in the next month or two will decide how much to approve and determine the settlement period thereafter.

These RCA amounts are calculated when rates that were determined in advance based on certain assumptions result in over or under recovery when actual values ​​differ from initial assumptions. In the recent past, this has primarily resulted in Eskom being compensated for such insufficient recovery through rate additions in subsequent years.

In the last two scenarios, Nersa has not taken into account the R10.7 billion.

The further big difference in Eskom and Nersa’s initial calculations is the inclusion of R46 billion from the government capital injection of R69 billion that Nersa illegally deducted from Eskom’s allowed income in 2019/20, 2020/21 and 2021 / 22.

Read: Court allows Eskom to recover R69bn in three years

Nersa previously admitted that he acted illegally and was ordered to add it back to Eskom’s allowable income equally for three years.

Appeal

Nersa appealed the court order, arguing that he only made a mistake in not consulting Eskom when he deviated from the prescribed methodology, but that he was not prevented from making such a deduction. He wants the court to refer the decision to the regulator.

Eskom strongly opposes this.

No date has been set for the appeal and the order has been suspended pending.

In the current rate year, Eskom and Nersa agreed to add R10 billion out of the R69 billion to allowable revenue to ensure Eskom’s ability to continue operating in light of the strong pressure on its liquidity.

According to full-time Nersa member for electricity Nhlanhla Gumede, Eskom has given up the balance of the first 23 billion rand and has yet to repay 46 billion rand of the 69 billion rand. (It seems that Eskom differs and still considers its right to a total of R59 billion).

The total of R46 billion has been included in Nersa’s initial calculations.

In the last two it included 23 billion rand.

‘Discussion needed’

Gumede told Moneyweb that he believes Eskom and Nersa will have to have a discussion similar to the one they had when they agreed to pay R10 billion. “We will have to consider [the repayment of the equity injection],” he said.

This is all very confusing for electricity users, but it is also extremely important to understand and engage with it.

The fact of the matter is that Eskom’s latest rate application as such must be thoroughly interrogated even before all additional amounts are taken into account.

In recent years, what Eskom achieved was a far cry from what it asked for. Clearly too far to ensure its sustainability.

Read: Eskom’s Choice: R300bn Environmental Compliance or 16,000MW Closure

Furthermore, the courts have found that the regulator failed in its rate determinations time and again.

On the other hand, the inefficiencies at Eskom are often mind-boggling and operations are becoming less efficient.

Consumers now have a say in and should do everything they can to make sure Eskom gets only what it is legally entitled to, that is, recoup its cost of efficiency and a reasonable margin from the tariffs.

Not a penny more, not a penny less.

Click here for Nersa’s invitation to submit written comments.

The closing date is January 14 at 4:00 p.m.


www.moneyweb.co.za

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