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Nersa gears up to release consultation paper on Eskom’s latest revenue application

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Photo by Creamer Media

6th December 2021

By: Terence Creamer

Creamer Media Editor

     

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The National Energy Regulator of South Africa (Nersa) will release a consultation paper on December 8 alongside Eskom’s fifth multiyear price determination application (MYPD5), which covers the three financial years from 2022/23 to 2024/25.

The paper, which is currently being finalised, will outline why the tariff decision will be confined to the 2022/23 financial year, rather than all three financial years covered in Eskom’s application, which was formally lodged on June 2 and initially rejected by Nersa on September 30.

The decision to limit the adjudication to a single year was confirmed during a special meeting of Nersa’s electricity subcommittee on Monday, held after a High Court ruling on December 3.

The court set aside Nersa’s rejection of the application and ordered the regulator to make a final decision on Eskom’s revenue application by February 25 so as to ensure that a tariff is in place for legal implementation on April 1.

The consultation paper is also likely to outline previous revenue decisions made in Eskom’s favour as a result of regulatory clearing account (RCA) adjudications, at least parts of which will probably have to be liquidated over-and-above any tariff increase decided for 2022/23.

The paper is also likely to outline further amounts that could arise from ongoing legal disputes with Eskom, including a R59-billion residual claim arising from the regulator’s decision to illegally deduct a R69-billion equity injection from the utility’s allowable revenue for the period 2019/20 to 2021/22.

Eskom and Nersa reached a settlement whereby R10-billion of that equity injection was recovered in the 2021/22 tariff, with the balance subject to a Nersa Supreme Court of Appeal application.

In his December 3 ruling setting aside Nersa’s rejection of Eskom’s MYPD5 application, Judge Jody Kollapen also made the following order:

  • that Eskom’s revenue application submitted on June 2, 2021 be published on December 8, 2021;
  • that the public have until January 14, 2022, to make representations on the content of Eskom’s application;
  • that public hearings on the merits of Eskom’s revenue application be held between January 17 and 21, 2022; and
  • that Nersa shall make a final decision on Eskom’s application by February 25, 2022.

While the contents of Eskom’s 2022/23 application have not yet been made public it has been reported that the utility would be seeking a tariff increase of about 20% for the coming year.

Whether that reported figure includes the liquidation of all outstanding RCA amounts, and the full recovery of the equity injections, will become clear once the MYPD5 application is published by Nersa on Wednesday.

In the meantime, the Energy Regulator also approved the publication of reasons for decision relating to the principles to be used to determine future prices in the electricity supply industry.

The approved principles include the unbundling of activities across the value chain and the use of activity-based costing, as well as the unbundling of services within each activity.

These principles are expected to be integrated into the future tariff-setting methodology, which Nersa aims to finalise by July or August next year.

 

Edited by Creamer Media Reporter

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