Eskom set for a showdown with Nersa
JOHANNESBURG - Eskom is set for a showdown with the National Energy Regulator of South Africa after the struggling utility said that it planned to take the regulator to court over its tariff determination.
Eskom said it wanted to recoup billions it lost after Nersa shot down its revenue revenue application seven months ago.
Eskom said Nersa’s decision, which allowed tariff increases of 9.41 percent, 8.1 percent and 5.22 percent for the next three years to 2022, had left it with a shortfall of approximately R102 billion compared to what was applied for.
Eskom applied for R219 billion, R252bn and R291bn for the 2019/20, 2020/21 and 2021/22 years, respectively. but Nersa, in its Multi-Year Price Determination (MYPD) 4, granted the utility R206.380bn, R221. 843bn and R233.078bn respectively.
Chief financial officer Calib Cassim on Friday said that Eskom wanted an order to address the shortfall in a phased manner.
Cassim said the MYPD4 decision has exacerbated the situation on Eskom further, and raised questions about Nersa’s commitment to implementing its mandate.
“In addition, we are seeking the court to review and set aside Nersa’s MYPD4 revenue decision and remit that decision to Nersa for reconsideration in the light of the Court’s judgment,” Cassim said.
The decision comes as government upped its ante on Eskom bailouts this week, after ratings agencies downgraded the cash-strapped utility’s credit profile deeper into junk, citing weakening revenue growth, margin expectations resulting from lower tariff awards
The decision has made it difficult for the utility to access finance in the international bond market.
On Wednesday, Eskom reported that it incurred a R21 billion loss and over R440 billion in debt for the financial year ended in March.
Acting chief executive and chairman told Parliament that the utility was in dire financial straits and needed to claw back billions lost to corruption and non-payments by both consumers, big customers and municipalities.
Mabuza said the utility’s operating costs had leapfrogged 30 percent in the past five years reaching R150-billion in 2019.
He said Eskom had to resort to diesel and independent power producers (IPPs) to keep the lights on.
However this operating costs higher.
The National Treasury put down strict conditions the utility had to meet before it received money from the state.
It said Eskom needed to increase its revenue collections from entities that owed it and provide daily liquidation updates.
Cassim said Nersa’s decision added to its problems.
“It is our understanding from Nersa’s reasons for decision that the rules and principles of the Electricity Regulation Act as well as the MYPD methodology have not been duly considered by NERSA in arriving at the decision made in terms of our revenue application,” he said.
Mineral Resources and Energy Minister Gwede Mantashe last week said that the government would talk to coal producers to cut prices to reduce electricity prices and help save Eskom from financial collapse.
Mantashe said the economy would collapse at the current prices of electricity.