HomeIndustry SectorsFinance and PolicyNERSA announces decision on Eskom's Regulatory Clearing Account

NERSA announces decision on Eskom’s Regulatory Clearing Account

The National Energy Regulator (NERSA) has announced that based on the information at its disposal it has granted Eskom R32.69 billion following its Regulatory Clearing Account (RCA) application for the 2nd, 3rd and 4th years of the MYPD 3 period (2015 – 2017).

The total balance is as follows:

  1. an RCA balance of R12.577 billion for the 2014/15 financial year;
  2. an RCA balance of R12.058 billion for the 2015/16 financial year; and
  3. an RCA balance of R8.055 billion for the 2016/17 financial year.

The RCA balance of R32.69 billion will be recoverable from the standard tariff customers, local Special Pricing Agreements (SPAs) and international customers, the regulator said.

The Reasons for Decision for each of the three applications will follow once the applicable requirements, including, but not limited to, the confidential treatment of some information, have been finalised.

An implementation plan for the RCA balance of year 2 (2014/15), year 3 (2015/16) and year 4 (2016/17) of the MYPD3 will be developed for approval by the Energy Regulator by 30 September 2018.

The Energy Regulator considered that Eskom conceded that certain governance failures occurred in Eskom but, at the time of the decision, the extent of the governance failures or 2 amounts associated therewith had not been quantified.

The Energy Regulator may initiate its own investigation into the governance failures in Eskom and may effect adjustments to Eskom’s revenue based on the relevant outcome of its investigation and/or those undertaken by bodies or entities, including, but not limited to, Eskom, National Treasury, Special Investigating Unit, South African Directorate for Priority Crime Investigation (Hawks), the Parliament of the Republic of South Africa or any Commission of Enquiry as and when they have been concluded and the costs associated therewith have been quantified.

Eskom applied for a total RCA balance of R66.6 billion (year 2: R19.185 billion, year 3: R23.622 billion and year 4: R23.786 billion) in its favour for consideration by the Energy Regulator. The RCA is necessitated by the fact that the revenue and expenditure approved for Eskom is largely based on forecasts.

It is a tool used to manage the risk of excess or inadequate returns on Eskom’s part. It is a depository for qualifying variances between the revenue and expenditure approved for Eskom in the multi-year price determination period and its actual revenue and expenditure.

In considering or assessing the RCA application, the Energy Regulator only allows expenditure that has passed the efficiency and prudency test. In terms of the provisions of the MYPD 3 Methodology, the Energy Regulator has to, upon application by Eskom, assess certain qualifying allowed revenue and expenditure against actual revenue and expenditure.

The Energy Regulator made the decision after conducting the due regulatory process, which included publishing Eskom’s RCA applications and inviting written comments from stakeholders from 22 January to 23 March 2018. Public hearings were conducted in all nine of South Africa’s provinces between 16 April and 14 May 2018 to afford interested and affected stakeholders the opportunity to present their views, facts and evidence.

The Reasons for Decision document will be available on the NERSA website at www.nersa.org.za in due course.

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.