Eskom will be allowed to make big electricity price increases

Eskom has welcomed a decision by the High Court to set aside the National Energy Regulator (Nersa)’s decisions on the utility’s regulatory clearing account (RCA) submissions.

The judgement now opens the door for Eskom to retroactively recover billions in tariffs for electricity used by consumers between 2014 and 2017.

“Eskom had made an application for R67 billion for the three RCA balances, whereas Nersa had determined the balanced to be R32 billion,” Eskom stated.

The power utility can, therefore, implement price increases to consumers that are much higher than the previously-approved 8.10% and 5.22% for the 2020/21 and 2021/22 financial years.

“The RCA mechanism allows Eskom the opportunity to achieve the initial revenue that was allowed during the revenue decision and to adjust the allowed revenue due to changes in costs that are subject to re-measurement as outlined in the Multi-Year Price Determination (MYPD) Methodology published by Nersa,” Eskom explained.

The utility noted that changes in costs are generally due to two key areas – a significant change in the environment and the nature of the original decision.

“The judgement accepts that Eskom had put forward a proper case for relief in those key areas where Nersa did not implement its methodology and precedents,” Eskom said.

“The areas specifically dealt with are the treatment of revenue variances, coal costs, independent power producer costs, and the capital expenditure clearing account,” it added.

Possible price increase of 15%

Nersa previously admitted to procedural mistakes in its revenue and RCA decisions.

This included considering a R69-billion Eskom bailout by the government as revenue when it should have been appropriated as an equity injection.

The regulator subsequently withdrew its opposition to two court applications from Eskom to allow it to recover this money through electricity price increases.

The court is yet to rule on the matter relating to the bailout amount.

Eskom told MyBroadband that a report from Rapport claiming that the utility indicated it wants to increase prices by 15% next year was correct.

Any price adjustments will likely be from 1 April 2021 onwards, Eskom said.

The utility said the correction of the unlawful and poor decisions made by Nersa will assist Eskom to return to financial sustainability.

Now read: Eskom employees held hostage and forced to unlawfully restore supply

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Eskom will be allowed to make big electricity price increases