Eskom warns it might have to raise its debt levels further

An electricity pylon (iStock).
An electricity pylon (iStock).

Eskom officials have told the National Energy Regulator of South Africa that the power utility might have to raise debt levels in order to cover costs.

The energy regulator (Nersa) on Monday held public hearings on Eskom's Regulatory Clearing Account (RCA) or clawback tariff application in Midrand.

The RCA allows Eskom to recover revenues it might not have been able to raise in prior years.

Eskom's General Manager for Regulation, Hasha Tlhotlhalemaje, said that the RCA application is in line with the Electricity Regulation Act, the multi-year price determination methodology and Nersa's guiding principles.

"Nersa determined Eskom's efficient revenue should be R190 billion for the 2018/19 financial year, which needed to be recovered over a volume of sales determined by Nersa.

"However, the sales were lower than those determined by Nersa, resulting in Eskom not recovering the allowable revenue in the Nersa decision, where it granted Eskom a 5.2% tariff increase (3% for Eskom and 2.2% for independent power producers)," Tlhothalemaje said. The methodology requires that the gap in revenue related to the difference in sales be recovered, she added.

Corporate Specialist at Eskom, Deon Joubert, said Eskom has "no option" but to raise debt to "plug the gap" between the current price levels and what they should be in order to cover costs.

According to Eskom, a long recovery period is not reasonable. Eskom proposed that R13.5 billion of the R27 billion - about half of the RCA balance application - be liquidated in the 2022 financial year; this is the final year of the MYPD 4 application and the remainder of the first year of the MYPD 5 period. "Eskom had to increase its debt levels due to the delay in recovering efficient costs," the statement read.

Governance failures

Tlhotlhalemaje also addressed concerns of governance lapses at the power utility. "We understand that there are questions about the impact of governance failures at Eskom and would like to reassure all stakeholders that we are committed to comply with the guidance set by the regulator that once the extent of the governance failures or amounts associated therewith have been fully quantified, these will be taken into account," she said.

Eskom is in a process of recovering monies lost through state capture. President Cyril Ramaphosa told parliament last week that the power utility, and Transnet collectively have recovered R2.3 billion so far, Fin24 previously reported.

In a statement issued earlier on Monday night, Eskom said it does not expect to implement load shedding as some of its generating units have come back online.

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