Nersa evasive about interim power hikes

FILE: Cape Town. Restuarants relied on candlelight to keep their customers happy. Picture COURTNEY AFRICA

FILE: Cape Town. Restuarants relied on candlelight to keep their customers happy. Picture COURTNEY AFRICA

Published May 16, 2014

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Johannesburg - The National Energy Regulator of SA (Nersa) played its cards close to its chest yesterday, not wanting to divulge information on how much revenue Eskom had under-recovered in the second multi-year price determination (MYPD2) period.

Eskom said it was expecting Nersa’s determination on its submission for the evaluation and approval of the regulatory clearing account (RCA) balance for the period that ended last year later this month.

The size of the account balance, or Eskom’s revenue under-recovery during MYPD2, relative to its allowable revenue will determine whether any electricity price adjustments will be made next year.

If the account balance is between 2 percent and 10 percent of allowable revenue, the shortfall can be recovered through tariff adjustments in the next financial year. But Eskom has consistently dismissed suggestions that it could impose a tariff increase.

However, yesterday the utility said that once Nersa had verified the clearing account balance, a decision would have to be made on how it would recover the shortfall.

It said this could be through an adjustment of electricity tariffs, but it would inform its customers if tariff adjustments had to be made.

The utility submitted its RCA application in the last quarter of last year.

Yesterday, Nersa spokesman Charles Hlebela would say nothing except that “the energy regulator is still to make the decision on the RCA”.

This was despite reports that surfaced last week saying Nersa’s electricity sub-committee had approved a recommendation to give Eskom an interim tariff increase.

The only instance in which Nersa can deny Eskom the opportunity to claw back under-recovered revenue through tariffs is if the clearing account balance is less than 2 percent of the allowable revenue.

In its application for the third multi-year price determination period from 2013/14 to 2017/18, Eskom said its cost of procuring power from independent power producers was recoverable as a pass-through on the RCA.

Eskom’s acting chief executive, Collin Matjila, said the clearing account, which was a regulatory mechanism reconciling the variance between projected and actual revenue as well as certain costs that the utility incurred, was a common feature in electricity regulation worldwide and would ensure that both Eskom and its customers were treated fairly.

Like Nersa, Eskom did not provide information on whether or how much it fell short of its allowable revenue.

Eskom had applied for a downward revision in its tariff increase in the last year of MYPD2 saying it was in a healthy financial and operational position to function with a 16 percent average tariff increase instead of the originally approved 25.9 percent. Nersa’s determination translated to a reduction of R11.153 billion from the MYPD2 approved revenues for the utility in the 2012/13 financial year.

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