Electricity price increase: NERSA calls for responses to Eskom’s application to deviate


The National Energy Regulator of South Africa (NERSA) has called for responses regarding Eskom’s application to deviate from prescribed procedures in an application for another tariff increase.

Eskom, which has been authorised by NERSA to submit a 1-year tariff application for 2018/19 instead of its usual multi-year application, on 1 June 2017, has indicated that it is unable to provide the prescribed and minimum information to NERSA with its application.

In terms of a judgment made last year, the regulator must consult the power utility’s customers before deciding to allow deviations from the prescribed methodology. NERSA therefore calls on affected stakeholders, electricity users and the public to send their comments to NERSA before 18 May 2017 regarding Eskom’s request for permission to deviate from the standard requirements for tariff-related requests.

In a letter to NERSA dated 28 March this year, Eskom’s Chief Financial Officer, Anoj Singh, asked for permission to deviate from the usual procedure, saying that NERSA’s request for certain information is “untenable”.

The list of information, which Singh says is not exhaustive, includes a valuation its asset base; research costs; coal volumes burnt per power station, per contract type and per supplier; coal-handling costs; costs per station for water procurement; costs related to water treatment per station; a segmented cash flow statement for the latest reporting period; capital expenditure per business category, such as the strengthening and refurbishment of electricity distribution installations; per power station, and per generation technology.

NERSA made a number of changes to the rules it applies when considering Eskom’s tariff applications, apparently to improve its oversight of Eskom’s coal purchases. In terms of the new rules, Eskom is required to disclose more detailed information about its coal purchases. It has been suggested that this decision was taken due to allegations of corruption pertaining to certain coal contracts and suppliers.

NERSA has published Eskom’s request for deviation on its website and is asking electricity users to comment by 18 May 2017. The Regulator says it will communicate its decision regarding the request for deviation by 26 May 2017.

To motivate the utility’s request, Singh refers to a clause in the existing multi-year price determination methodology document which states that NERSA may condone certain non-compliance with the procedures set out in the methodology. However, Judge Cynthia Pretorius, in a judgment made on 16 August last year, set aside the regulator’s earlier decision to grant Eskom a tariff increase of 5,9% over and above the 8% it had already been granted for the 2016/2017 tariff period, apparently because of Eskom’s non-compliance with the prescribed methodology.

The utility appears to be trying to do the same thing again: requesting an additional tariff increase from NERSA without being willing to supply the information needed by the Regulator as prescribed.

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Source: EE plublishers