Eskom NERSA

[Tariffs]Nersa to make Eskom tariff decision before March 15

http://www.engineeringnews.co.za/article/nersa-to-make-eskom-tariff-decision-before-march-15-2019-02-05

Nersa to make Eskom tariff decision before March 15

Photo by Dylan Slater
Eskom CFO Calib Cassim pictured during the marathon Gauteng leg of nationwide public hearings, which started in Cape Town on January 14

5TH FEBRUARY 2019 

BY: TERENCE CREAMER 
CREAMER MEDIA EDITOR

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The National Energy Regulator of South Africa (Nersa) says it will make a ruling on Eskom’s heavily contested revenue application before March 15, but has not committed to a firm date for the release of the determination.

Full-time regulatory member Nomfundo Maseti, who chaired the marathon Gauteng leg of nationwide public hearings that started in Cape Town on January 14, announced the timeframe for the decision on Tuesday.

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She said Nersa would now enter a period of intense evaluation and assessment having received hundreds of written and oral inputs during January and February from Eskom as well as business, labour and civil society stakeholders.

In its fourth multiyear price determination (MYPD4) application Eskom requested allowable revenue of R219-billion for 2019/20, R252-billion for 2020/21 and R291-billion for 2021/22, which translated to three yearly tariff increases of 15%.

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It had since lowered its sales forecast for the period, which resulted in its request being revised to 17.1% for 2019/20, 15.4% for 2020/21 and 15.5% for 2021/22.

The 2019/20 increase would be additional to the 4.41% rise already approved for the year as a result of Nersa’s adjudication, last year, of Eskom’s Regulatory Clearing Account (RCA) applications.

The MYPD4 application was accompanied by a new RCA application for 2017/18 that, if approved, would result in a further 2.8% hike being introduced from 2021/22.

All the stakeholders who made presentations to Nersa called on the regulator to reject the hikes, which they said would risk jobs, growth and investment.

While some argued that no increases should be permitted until Eskom had cleansed itself of corruption and inefficiency, others argued that the increases be capped at the level of inflation.

Eskom CFO Calib Cassim highlighted that the RCA approval alone, together with the pass through of about 2% for current and future independent power producer contracts, would already increase the tariff to the level of inflation, before any allocation for the fixed and variable cost increases outlined by the utility for the coming three year period.

He also cautioned that Eskom would struggle to compile a compliant revenue application for 2020/21 onwards should Nersa side with those calling for a single-year determination until the current uncertainty about Eskom’s structure and role in the electricity supply industry had been resolved.

The utility has warned that it will make a R20-billion loss for the year to March 31, 2019, and that, a similar level of loss should be expected in 2019/20, even if Nersa approves if full tariff required for the year, which would be 21.5%, with the RCA component.

However, business has cautioned that electricity had already reached the limits of affordability and that some sectors, notably gold and platinum mining, could be forced to close production.

Minerals Council South Africa has warned that the hikes being sought could “render almost all gold operations (95%), representing 96% of gold production, loss-making or marginal in a short period of three years, threatening a total of 98 509 jobs”.

Cassim said Eskom was sensitive to the impact that electricityincreases has on vulnerable customers including the poor and identified distressed industries.

“We have actively encouraged exploring policy options with government to protect identified vulnerable sectors, a matter that has become urgent. We are encouraged that Nersa has already approved two short-term incentives that addressed distressed industries successfully. There is a need to tie-up these interventions with South Africa’s industrial policy and economic development strategy to ensure sustainability for all.”  

EDITED BY: CREAMER MEDIA REPORTER 

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