Another power tariff hike on cards

The National Energy Regulator of SA (Nersa) has given Eskom only half the money it asked for in its latest tariff application, and signalled that it could make further cuts if it found that governance failures at the power utility had inflated its costs.

The regulator’s decision on the utility’s Regulatory Clearing Account (RCA) application will add to whatever tariff increases Eskom is allowed from April next year, but Nersa will decide only in September on how the extra tariffs will be phased in.

Nersa’s decision came as workers staging violent protests against cash-strapped Eskom’s 0% wage offer disrupted operations at several of its power stations.

This prompted the utility to announce the implementation of load-shedding during the peak hours last night.

However, the stage-one loadshedding was lifted just hours after it was instated.

The earlier decision came after Eskom conceded during public hearings in May on the RCA application that alleged corruption and fraud at the utility could have affected costs, particularly its coal costs.

Nersa chairman Jacob Modise said yesterday it might initiate its own investigation into the governance failures at Eskom and might effect adjustments to the utility’s revenue based on the relevant outcome of its investigation.

It could also adjust revenue in the light of findings of other bodies such as the Hawks, the Special Investigating Unit, the Treasury, parliament and any commission of inquiry.

State capture at Eskom is the subject of several inquiries and is expected to feature prominently in the Zondo commission of inquiry into state capture, which starts its public hearings in August.

Eskom had asked for almost R67-billion to compensate for lower-than-expected electricity sales and higher-than-expected coal costs in the three years from 2014 to last year, but the regulator awarded it R32.7-billion yesterday, which will have to be added to whatever tariff increases Eskom is allowed from April next year.

Nersa has become increasingly intolerant of Eskom’s constant pleas for more money to cover cost overruns, and last year cut the 19.9% increase the utility had requested for the 2018-19 year to 5.2% – prompting Eskom to take it to court.

Eskom will apply to Nersa in August for the next three years of tariff increases, the Multi-Year Price Determination 4, which runs from April next year.

It is also likely in August to put in another RCA application, covering the latest (2017-18) year.

Nersa is expected to wait for all these applications to see the total of what Eskom is asking to cover its costs over the medium term, so that it can have a full picture of what the overall effect will be and what the economy can afford.

Eskom acting chief financial officer Calib Cassim said yesterday the utility would be able to fully understand the basis of Nersa’s RCA decision only once it had seen the detailed reasons for the decision, which Nersa has not yet released.

Minerals Council (formerly the Chamber of Mines) economist Henk Langenhoven said Nersa’s decision was welcome, but after several years of electricity tariff increases of 6%-8%, the mining industry would be “on the floor” if there were any more above-inflation tariff increases.

Nelson Mandela Bay Business Chamber chief executive Nomkhita Mona said: “As the business chamber said in November, the public cannot be penalised for Eskom’s inefficiencies as a result of maladministration and governance failures.

“We maintain this view. As a state-owned company, Eskom is accountable to the public.

“The Nersa decision is very disappointing. This has farreaching consequences for the electricity user and municipalities – but when the actual increases come through to the consumer is still unknown.”