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Why Nersa granted Eskom 9.4% tariff hike

Mar 01 2016 14:02
Wim Pretorius

Pretoria - National energy regulator Nersa has given two main reasons for granting Eskom a 9.4% tariff increase for the 2016/17 financial year.

The hike will kick on 1 April.

READ: Nersa approves 9.4% electricity price hike

In terms of sales, Eskom applied for a “regulatory clearing account” (RCA) balance of R11.723bn. The energy regulator allowed R6.175bn. The larger part of this difference is because Eskom did not disaggregate the special pricing agreements and international sales when allocating the approved third Multi-Year Price Determination (MYPD3) revenues to different customer categories, said Nersa.

The RCA is a depository for qualifying variances between the revenue and expenditure approved for Eskom in the MYPD3 and its actual revenue and expenditure. The RCA is necessitated by the fact that the revenue and expenditure approved for Eskom is largely based on forecasts.

The MYPD Rules require that, from time to time, a reconciliation of these variances be done in order to quantify over or under collection of revenue and over or under expenditure on Eskom’s part. It is important to indicate that the Energy Regulator only allows expenditure that has passed the efficiency test.

With regards to other primary energy, the energy regulator has disallowed coal handling and start-up gas and oil. Furthermore, nuclear has been re-phased over the life of the nuclear plant.

With regard to open cycle turbines (OCTG), Eskom applied to recover R8.024bn. The energy regulator has allowed Eskom to recover R1.252bn. The energy regulator has found that Eskom used the OCGTs due to the unavailability of the plant. In this regard, the energy regulator has allowed the excess production from OCGTs at a rate equivalent to the coal price instead of the actual cost of operating the OCGTs.

Eskom submitted an application to Nersa in November last year to recover R22.8bn, which the utility said it used to avert load shedding.

The decision comes after extensive consultation with government, unions, small and intensive users, who engaged in public hearings in six provinces, according to Nersa chairperson Jacob Modise.

The energy regulator made the decision after conducting due regulatory process, which included publishing Eskom’s RCA application and inviting written comments from stakeholders. Public hearings were conducted in six of South Africa’s provinces between January 18 2016 and February 5 2016 to afford interested and affected stakeholders the opportunity to present their views, facts and evidence.

Modise said the challenge has been and still is regulating the energy industry in a manner that balances the interests of energy producers on the one hand and consumers on the other.

Nersa evaluated the RCA balance for the first year (2013/14 period) of the MYPD3 amounting to R22.8bn.

ALSO READ: SA not ready for another unaffordable tariff hike, Nersa hears

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nersa  |  eskom  |  sa economy  |  tariff hikes

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