CAPE TOWN - Eskom will make a strong push next week for the National Energy Regulator of South Africa (Nersa) to allow it to claw back R66billion for the 2014/15, 2015/16 and 2016/17 financial years.
The power utility has made an application to Nersa for a regulatory clearing account (RCA) to recoup the money in order to ease its liquidity problems in a move that could see electricity prices soaring further.
It said the large RCAs and the delay in processing the applications placed its financial position under pressure.
Eskom has attributed the coal costs to lower production from so-called cost plus and fixed price mines, resulting in a switch to the more expensive short-term and medium-term coal contracts.
Corporate specialist Deon Joubert said reclaiming the R66bn would not necessarily prejudice customers, because Nersa would have granted Eskom higher tariffs had the correct estimates for revenue, primary energy coal purchases and other variables been used.
“There would have been no shortfall had the estimates been for the consumer getting the benefit of paying a lower amount, which Eskom had to find by loans without (the consumer) paying interest on it. Eskom had to borrow money in those years in order to pay for the costs. Eskom is paying interest on the money it had to borrow, because of the shortfall that would not have (materialised) had the estimates been right,” said Joubert.
Backward-looking
The RCA is a backward-looking mechanism that seeks to reconcile what Nersa awarded Eskom on the basis of what was forecast in the Multi-Year Price Determination and what materialised, as reflected in the utility’s financial statements.
A variance in revenue accounts for 67percent (R44bn) of the R66bn that Eskom wants to claw back.
The power utility has attributed the revenue variance to lower electricity sales volumes. It has attributed the lower sales volumes to, among others, a downturn in the economy, lower investor confidence and commodity price changes.
Costs associated with the independent power producers contributed R7.4bn (11percent) of the R66bn, while coal costs accounted for R3.5bn (5percent).
International purchases contribute R9.2bn over the three RCAs, while open cycle gas turbines contributed 2percent (R1.4bn) over the three years.
On the other hand, the environmental levy provided a clawback to consumers of R3.3bn, mainly because of the lower electricity sales.
On Monday, the regulator will commence with public hearings on Eskom’s RCA application in Cape Town. Nersa said it would announce its decision on June 21.
The Energy Intensive User Group (EIUG) of Southern Africa has urged Nersa to allow only R40bn of the requested clawback.
The EIUG, which represents intensive consumers who currently account for about 40percent of electrical energy consumed in South Africa, has been agitating for Eskom’s restructuring, saying marginal adjustments and cost savings would not save the power utility.