Cape Town - The National Energy Regulator of South Africa (Nersa) caught Eskom out, as it were, in several instances where the utility unnecessarily exaggerated costs in its application for a 35% tariff hike.

On Tuesday this emerged in a submission by Nersa to the parliamentary portfolio committee on energy.

Thembani Bukula, who is responsible for electricity regulation at Nersa, showed the committee that Eskom had requested a 7%-odd increase in personnel costs as part of its operating expenses.

Nersa considered an increase at the inflation rate of 5.6% to be more realistic, thus saving R739m of the total that Eskom had requested as permissible income.

In another instance, premium increases of up to 11% for insurance cover were included in the tariff application. Nersa compared this with prevailing international benchmarks and found a smaller increase to be adequate.

The total saving on Eskom's application for operating expenses was R1.487bn for the three financial years to 2012/13.

In the portion of Eskom's application that dealt with primary energy costs, Eskom had asked for R694m to pay for importing electricity from neighbouring countries. Nersa found that R540m of this amount had already been included elsewhere, and only R154m was approved.

Bukula said that Eskom's capital expenditure in the 2009/10 financial year had been R92bn and, despite the recession and poor market conditions, it had been able to borrow R47bn. Nersa therefore considered there was no reason for Eskom to limit its loans in the new financial year to R40bn.

The regulator had also allowed itself to be guided by what credit rating agencies required for an entity to be considered for loans.

Had Nersa granted Eskom a 15% increase, it would have been bankrupt within four years if one accepted that its capital expenditure would continue as before.

- Sake24.com

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