Eskom gets the nod for R32.6bn in clawback tariffs

Cash-strapped power utility Eskom is finally tackling the controversial issue of its headcount.
Cash-strapped power utility Eskom is finally tackling the controversial issue of its headcount.

The National Energy Regulator (Nersa) has approved R32.69bn for Eskom's multi-year price determination Regulatory Clearing Account (RCA) applications – funds Eskom must recover due to an electricity shortfall or an escalation in operating costs.

These funds may be recovered through tariff hikes. How this would affect consumers will only be announced in September. 

Eskom had applied for a total RCA balance of R66.6bn from the energy regulator. The R32.69bn ultimately approved by Nersa would cover the 2014/15 – 2016/17 financial years and would be recovered from standard tariff customers, Nersa said.

"The RCA is necessitated by the fact that the revenue and expenditure approved for Eskom is largely based on forecasts," said Nersa Chairperson Jacob Modise.

"It is a tool used to manage the risk of excess or inadequate returns on Eskom's part," he added.

Eskom's acting Chief Financial Officer Calib Cassim said the power utility was studying the decision. 

'Efficiency and prudency test'

A total of R12.5bn was allocated for 2014/15, followed by R12bn for 2015/16 and R8bn for the 2016/17 financial year.

Nersa said the decision to grant the applications was reached after "conducting the due regulatory process".

"In considering or assessing the RCA application, the energy regulator only allows expenditure that has passed the efficiency and prudency test," said Modise.

The regulator said it had also taken into consideration Eskom's "certain governance failures".

It added that it may initiate its own investigation into the governance failures in Eskom, and may effect adjustments to Eskom’s revenue, based on the relevant outcomes of its investigation and those of other bodies, including Treasury, the Special Investigating Unit, and Parliament.

The power utility is facing severe financial challenges and has applied for tariff hikes in a bid to boost income.

Eskom is also facing industrial action after saying it was unable to offer salary increases. On Thursday its CEO Phakamani Hadebe committed to reopening wage talks with trade unions.  

On December 15, 2017, the energy regulator approved a 5.23% tariff increase for the power utility, which had requested a 19.9% increase for the 2018/19 financial year. 

Eskom has launched a court application challenging the decision.

The Organisation Undoing Tax Abuse said in a statement that it was disappointed by NERSA’s decision. At public hearings it had motivated for 0% recovery. 

"The decision leaves uncertainty over the future price of electricity, as NERSA will announce only by September how this recovery will be added to the price," it said. 

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