On Tuesday, South African power utility, Eskom, submitted an application to the National Energy Regulator of South Africa (NERSA) for the evaluation and approval of the regulatory clearing account (RCA) balance for the first year (2013/14 period) of the third multi-year price determination (MYPD3). Eskom has applied for an RCA totalling ZAR22.8 billion ($2 billion).
Adhering to regulatory rules
According to the utility, NERSA’s regulatory rules, stipulates that Eskom, after financial year end, must submit its RCA application to the regulator based on audited financial statements.
The MYPD Methodology (NERSA’s regulatory rules) allows Eskom “to adjust for the over or under recovery of preceding years’ regulated costs and revenues through the electricity tariffs in subsequent years,” the utility explained in a statement.
NERSA said in a company statement on Thursday that: “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.”
Application under review
The national power utility said in a statement: “NERSA will review Eskom’s submission and undertake a prudency review of the costs as required by the methodology.
“This will inform the decision on the quantum of the RCA. Once the quantum is determined, NERSA will decide on the liquidation of the balance which will inform the adjustment of electricity tariffs.”
NERSA explained: “Should the results of the assessment indicate that Eskom has to reimburse the customers, the price of electricity would have to decrease proportionally to the RCA balance. Similarly if the customers have to reimburse Eskom, the price would have to increase.”
The regulator advised that timelines for processing Eskom’s RCA application will be disclosed at a later stage.
ESI Africa will provide a link to Eskom’s application as soon as it becomes available.