The South African National Energy Regulator (Nersa) is preparing to host public hearings on Eskom’s application to recoup ZAR22.8 billion ($2 billion) through a regulatory clearing account (RCA). This is for the first year (2013/14 period) of the third multi-year price determination (MYPD3).
The hearings will be held nationally, commencing on 18 January in Cape Town and will end in Johannesburg on 5 February 2016.
The regulator has stressed that members of the public and stakeholders wishing to make their presentations and attend the hearing must submit their request, by 16h30 on Wednesday, 13 January 2016.
In November 2015, the state-owned power utility submitted its RCA application for the first year of the MYPD3, which according to Creamer Media it is under this methodology that Eskom has been “granted five yearly tariff increases of 8% until the end of March 2018.”
According to Nersa: “The RCA is a depository for qualifying variances between the revenue and expenditure approved for Eskom in the MYPD3 determination and its actual revenue and expenditure.
“The RCA is necessitated by the fact that the revenue and expenditure approved for Eskom is largely based on forecasts. The MYPD Rules require that from time-to-time a reconciliation of these variances be done in order to quantify over/under collection of revenue and over/under-expenditure on Eskom’s part. The Energy Regulator allows only expenditure that has passed the efficiency test.”
Approval to result in regular tariff increases
Creamer Media reported that the hearings will focus on, amongst other things, the utility’s intention to recoup costs amounting to ZAR8 billion, which was spent on diesel during that financial year.
They highlighted that should the RCA be approved, the country could see a tariff increase of 17% from 1 April 2016, opposed to the current increase set at 8%.
The regulator has a history of not granting Eskom’s its wishes—in June 2015, Nersa dismissed the utility’s selective reopener of the third multi-year price determination (MYPD) for Open Cycle Gas Turbines (OCGTs) and Short-term Power Purchase Programme (STPPP) and the increase in environmental levy, asking for a 25.3% tariff hike.
Following proper protocol
This decision was made based on the utility failing to follow proper protocol, which included the environmental levy increase application not being published in the gazette.
At the time, NERSA chairman Jacob Modise said: “The application did not provide the mechanism, on how the proposed increase, if granted, can be implemented in the current financial year in a manner that is consistent with the requirements of the Municipal Finance Management Act (MFMA) number 56 of 2003.”
It was then encouraged that Eskom submit a new application for period 1 April 2016 to 31 March 2019 with indicative projections for the period 1 April 2019 to 31 March 2021, which is in accordance with the MYPD methodology.
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