Eskom is seeking to recoup revenue of R27.3 billion for the 2019 financial year via its latest regulatory clearing account (RCA) application.
The state-owned power utility is pushing to raise electricity prices by 10-15% next year, followed by increases of 50% over the next few years.
The first session of the National Energy Regulator of South Africa (Nersa)’s public hearings were held in Cape Town today, where general manager for regulation Hasha Tlhotlhalemaje presented an overview of the power utility’s RCA application.
“This application deals with variances between what was assumed when Nersa made its decision on Eskom’s revenue application in the 2018/19 financial year and what eventually materialized as per Eskom’s audited financial statements as Eskom spent money in order to fulfil its mandate to provide electricity to South Africans,” Tlhotlhalemaje said.
Eskom has proposed that any balance agreed for the 2019 financial year be recovered as soon as possible, stating that to achieve the previous assumptions used to determine Eskom’s allowed revenue it would need to lose around 6,000 employees and significantly cut coal costs.
Unachievable cost reductions
“Achieving the amount that was assumed by Nersa would have meant Eskom decreasing coal costs by approximately 17% and ignoring its existing contractual obligations to coal suppliers,” Tlhotlhalemaje said.
“Regarding the assumed cost of employee benefits, it was based on an assumption that Eskom would lose about 6,000 employees at a go, which did not materialize, irrespective of whether the assumption had any merit in the first place.”
Eskom argued for increased electricity tariffs to account for the discrepancy between Nersa’s approved allowance for the most recent financial year and its actual costs and sales deviation.
“It is worth noting that Eskom’s application also includes variances that are in favour of the electricity consumer where initial revenue determination assumed higher costs for the year under review,” Eskom said.
“These include maintenance, independent power producers, environmental levy, return on assets, research and development, demand response programmes and other primary energy (due to a misalignment in the Nersa decision).”
Eskom cannot be saved
The DA has called on Nersa to reject Eskom’s application for tariff hikes, stating that consumers simply cannot afford to pay the proposed tariff increases.
“Eskom is currently in the process of challenging the electricity tariff increases previously approved by NERSA for 2019 to 2022, and now wants consumers to pay 10-15% more for electricity, followed by tariff increases of 50% over the next few years,” the DA said.
“The DA has long maintained that the ANC Government cannot continue to allow any form of bail-outs for a state-owned entity (SOE) that is no longer viable.”
“With over R400 billion of debt, the ANC must accept that Eskom can no longer be saved and that the lunacy surrounding Eskom bailouts, in any form, needs to end now,” it added.
The DA said it was “unconscionable” that Eskom would ask citizens to pay even more for electricity in the midst of the load-shedding crisis.
Date: 3 February 2020
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— Eskom Hld SOC Ltd (@Eskom_SA) February 3, 2020