HomeIndustry SectorsFinance and PolicyEskom seeks to recoup $15.9m by hiking power rates

Eskom seeks to recoup $15.9m by hiking power rates

Eskom’s Khulu Phasiwe said Eskom overspent on its projected costs by $15.9 billion due to the winter electricity shortages. Pic credit: News24

South Africa’s state-owned utility Eskom has appealed to the National Energy Regulator of South Africa (NERSA) to recoup ZAR22.8 billion ($15.9 billion) incurred due to increased spend on diesel.

Eskom spokesperson Khulu Phasiwe told Fin24 that the increased diesel usage was necessary to avert power cuts during the winter season.

“We spent money on acquiring diesel and electricity from IPPs. When we overspend on those items, we need to put our case to the regulator,” Phasiwe said.

He added: “If you can give evidence to the regulator you are in a position to get your money back … you are able to claw back some of your expenditure.”

Power rates to hike

If Eskom’s application to recoup its costs is approved, then the regulator will have to add an additional increase to any tariff hike that the utility is granted, with some experts predicting a total 16.6% rise in 2016.

According to a statement by Eskom, NERSA’s regulatory rules allow the utility to adjust for the over- or under-recovery of preceding years’ regulated costs and revenues through the electricity tariffs in subsequent years.

NERSA will evaluate the Regulatory Clearing Account (RCA) balance for the first year (2013/14 period) of the third multi-year price determination (MYPD3) amounting to R22.8 billion ($15.9 billion).

The MYPD methodology requires Eskom to submit its RCA application to NERSA based on audited financial statements at the end of the financial year.

NERSA will review Eskom’s submission and then carry out a judgment review of the costs as required by the methodology.

“This will inform the decision on the quantum of the RCA,” Eskom said.

After the required amount has been determined, NERSA will then decide on the liquidation of the balance which will inform the adjustment of electricity tariffs.

Babalwa Bungane
Babalwa Bungane is the content producer for ESI Africa - Clarion Events Africa. Babalwa has been writing for the publication for over five years. She also contributes to sister publications; Smart Energy International and Power Engineering International. Babalwa is a social media enthusiast.