Nersa kicks Eskom tariff can down the road

Energy regulator Nersa on Wednesday 14 December once again postponed the determination of Eskom’s tariffs for the next two financial years as its sub-committee needs more time to relook at least 14 items that make up the allowed revenue.

The regulator was expected to deal with the matter during its meeting later the same day, but the item was removed from the agenda.

This comes after the same committee about two weeks ago approved a recommendation that by all indications would have given Eskom a large portion of the 32% increase it applied for. Eskom wants a further almost 10% in 2024/25.

The meeting did not indicate when it is going to finalise its recommendation to enable the energy regulator to take a decision, but chair Nhlanhla Gumede reminded those present of the court-imposed deadline only 10 days away, on 24 December.

Gumede asked the officials to provide an action plan that indicates the issues to be addressed and the timelines for their report by the end of the day.

The postponement will also take the announcement of what may be a very painful increase for over-burdened consumers beyond the ANC’s elective conference due to take place over the long weekend of 16-20 December.

President Cyril Ramaphosa has been under fire from his ANC comrades about the ongoing severe load shedding and deteriorating performance of Eskom.

Moneyweb earlier reported that Eskom applied for an allowable revenue of R351 billion in 2023/24 and R381 billion in 2024/25.

This is what the Eskom application consists of:

Nersa has in recent years regularly approved increases far below those Eskom applied for, but has been hit by several adverse court rulings after Eskom challenged those decisions in court.

During the initial deliberations of the electricity sub-committee it was clear that those court rulings weigh heavily on the minds of officials.

Regulator member Nomfundo Maseti warned against decisions that are taken to appease Eskom for fear of being taken to court.

While the meetings are broadcast on the Nersa platforms and participants discuss the matters without naming any numbers, it was clear that the recommendation did not differ much from what Eskom is asking for.

It was stated that there was no variance from the Eskom application regarding primary energy, international purchases, the environmental levy and carbon tax, and research and development.

The committee recommended a dramatic increase in the allocation for diesel cost as it argued that it cannot approve a tariff that will necessitate load shedding, considering the poor performance of Eskom’s fleet of power stations.

The regulator was initially expected to take a decision on the basis of the committee’s recommendation about two weeks ago, but the item was withdrawn from the agenda.

Gumede blamed “gremlins that slipped into the calculations”.

Read: Energy regulator withdraws Eskom tariff decision from agenda

Regulator members seemingly had other concerns about the recommended increase as well, and a workshop involving them and officials was scheduled from early Wednesday morning.

This would have fed into a meeting of the sub-committee later the same morning for the reformulation of a recommendation and then a regular meeting for the final decisions.

During the sub-committee meeting it became clear that regulator members identified so many “gaps in the information and the analysis” that officials asked for more time to work on the matter.

From the discussion it was clear that a total of 14 items were pointed out to officials for reconsideration.

Some of these include Eskom’s employee and maintenance cost, and officials have to get the amounts Eskom has spent on coal so far this year and check whether the assumption of a 58% plant availability, which underpins the recommendation, bears out in reality.

This comes as Eskom’s latest data shows a new record low plant availability of 51.55% for the week ended 11 December.

During the regulator meeting on Wednesday it was decided to spread the clawback of more than R4 billion of revenue it underrecovered in 2019/20 over three years, starting 2024/25. This is a departure from the previous recommendation that it be recovered in 2023/24 and would shave of R4 billion from next year’s revenue, thereby lowering the increase a bit.

It however also withdraw the agenda item to determine the amount Eskom is allowed to claw back for 2021/22. Eskom applied for more than R10 billion.