File picture: Supplied

Johannesburg - The National Association of Automotive Component and Allied Manufacturers (Naacam) has cast doubt on the legality of Eskom’s application to claw back R22.8 billion for its 2013/14 financial year for the third multi-year price determination (MYPD3).

Roger Pitot, an advisor to Naacam, said Eskom’s application did not follow the regulatory clearing account (RCA) methodology prescribed by the National Energy Regulator of SA (Nersa) and Eskom was trying to recover the cost of its own inefficiencies.

In a submission to Nersa last week, Pitot said Nersa’s MYPD methodology document specified the RCA had to be created during the year the deviations were incurred; Eskom must present possible adjustments to Nersa on a quarterly basis; and the review was done prior to year-end.

However, the current application by Eskom came one-and-a-half years after the end of the financial year and there was no mention of this RCA in the annual financial statements, he said. Pitot said Eskom’s application, if successful, would result in an effective increase for 2013/14 of more than 25 percent for tariff-based customers and the adjustment would be effective almost three years after the event.

He said the Electricity Regulation Act stated that “tariffs must enable an ‘efficient licensee’ to recover the full cost of its licensed activities, plus a reasonable margin or return”.

Pitot said Eskom was not efficient and its operating costs had spiralled out of control and showed a large overspend in relation to the MYPD3 budget. Eskom had increased its headcount by 23 percent between 2008 and 2013/14 despite power generation remaining at the same level and its unplanned downtime had increased from 4.3 percent in 2006/07 to 12.6 percent in 2013/14 while maintenance expenditure increased from R5bn to R13bn in this period.

Consequences

Tariff payers were also subsidising neighbouring countries, with Eskom exporting 12.4 GWh at a tariff of R0.48/KWh while South African tariff users paid R0.66/KWh, which amounted to a subsidy of R2.2bn.

Pitot said the consequences of this application, if approved, were an inevitable further reduction of investment and employment in industry while the integrity of the MYPD process and price stability was being destroyed by Eskom’s failures.

Khulu Phasiwe, an Eskom spokesman, said the RCA application was in compliance with the Nersa MYPD methodology and had been independently verified, noting Eskom disagreed with Naacam’s claim that the integrity of the MYPD process and price stability was being destroyed by Eskom’s failures. “The current methodology ensures regulatory certainty and predictability (with respect to the outcomes), which supports investment decisions.

“However, this does not guarantee price certainty. Customers currently and in the past have had to deal with price volatility due to economic conditions. These include exchange rate fluctuations, fuel price fluctuations, interest rate changes, etc,” he said.

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