Eskom blacks out coal details in tariff hike application

Johannesburg – Parts of Eskom’s application for a 19.9% tariff hike, which concern the power utility's coal contracts, have been redacted in its application document despite an earlier ruling from South Africa’s National Energy Regulator (Nersa) that Eskom should bare all.

Eskom's application was released for public comment on 14 September. Hearings about whether the hike should be granted, start at the end of this month.

But civic organisations say they are alarmed that Nersa has now allowed Eskom to hide some of the critical information needed to determine if the massive hike should be allowed, after the regulator first compelled the state utility in July to disclose all in its application for a one-year increase in electricity tariffs. 

The redacted information, where tables concerning coal costs and contracts are blacked out, could contain details about Eskom's coal contracts with the Gupta-owned Tegeta Resources and the Optimum mine. 

In July Eskom appealed to the regulator to deviate from meeting certain requirements of the Multi-Year Price Determination (MYPD) methodology for its tariff application. The methodology puts questions to Eskom in terms of its operating expenses, coal burning rate and coal contracts, among others, and provides insight into the finances of the power utility.

Eskom's tariff hike application has redacted certain information that the state utility believes could cause harm to its financial interests.

Deviating from the methodology would allow Eskom to decline answering some of the questions Nersa had put to the state utility in determining whether it should be granted a price hike.

The regulator rejected Eskom's appeal on 27 July to deviate from the methodology, only allowing the exclusion of the valuation of Eskom's regulatory asset base and details of deferred debits and credits

Nersa spokesperson Poppy Mahlangu said this decision resulted in Eskom submitting a complete application on 25 August with all information requested by Nersa. 

But when Eskom submitted its revenue application, the power utility requested confidential treatment of specified information.

She said the regulator, at its meeting on 4 September, decided that the information was indeed confidential because its disclosure is likely to cause harm to the commercial or financial interests of Eskom which would not be in the public interest.

"The decision was taken based on the application and reasons submitted by Eskom."

Mahlangu said that in deciding on the confidentiality of parts of the Eskom revenue application, the energy regulator did consider whether the redacted information would still enable stakeholders to provide meaningful comments on the application.

"The regulator was satisfied that the information contained in the public version of the application is adequate for that purpose," she said.

Eskom spokesperson Khulu Phasiwe said Eskom's legal advisors had "delivered powerful arguments in debate," to convince Nersa to keep some of the information confidential.

Civic groups are upset that they only heard about the decision after discovering the blacked out sections in the application.

In a statement on Thursday, anti-corruption advocacy group the Organisation Undoing Tax Abuse (OUTA) said Nersa was allowing Eskom to hide crucial Eskom coal costs. The organisation said it discovered that Nersa agreed to let Eskom keep some costs secret after its original, despite publicly announcing that the information must be available.

While trawling through the document OUTA’s Energy Director, Ted Blom said he discovered that the coal contract section was not disclosed.

He said he had felt vindicated in August when Nersa’s original decision compelled Eskom to disclose all the information Nersa originally requested.

“However, that victory is now absolutely hollow."

Blom said the ruling was ratified at Nersa’s board meeting on 27 July, but then the decision was mysteriously revoked on 4 September without a word being said about it.

In its application Eskom appeals to Nersa to raise its total allowable revenue to R219.5bn, which means it needs a 19.9% increase.  The looming threat to consumers comes after Nersa approved a consultation process for Eskom’s 2018/19 revenue application.

July's public hearings on deviating from Nersa's methodology heard strong objections from organisations, including OUTA and Business Unity SA, arguing that the exclusion of certain information from its application, particularly on its coal contracts, would be a disservice to South Africa in the face of the massive hike Eskom was asking for. 

In the hearings, Eskom argued it could not provide key economic measures, such as capital expenditure, impairments and depreciation on a disaggregated basis.

Calib Cassim, Eskom’s general finance manager, said the source of coal purchases could be provided, but not the full granular detail about the origin of coal mixed and burnt at each station. This is apparently impossible to accurately measure.

Information that has been redacted includes details of coal contracts with mines belonging to Gupta-owned Tegeta Resources, as well as coal burn costs. Blom regards this as crucial information for a transparent and fair pricing decision.

“Nersa’s reversal indicates that the state capture movement may extend to Nersa as well, as the continued secrecy draws a veil over the corrupt Gupta transactions, which are believed to be worth billions of rand,” he said.

Blom said Nersa failed to publish the decision of 4 September and the agenda for Nersa’s executive meeting of 4 September does not include any reference to this matter.

“This is not transparent. Given this sad state of affairs, we reserve our right to approach the courts for relief if is needed,” he said.

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