The electricity subcommittee at the National Energy Regulator of South Africa (Nersa) met on June 19 to deliberate on Eskom’s request that the regulator condone the utility’s deviation from the multiyear price determination (MYPD) methodology and minimum information requirements for tariff applications (Mirta). The recommendations of the subcommittee will now be submitted to the Energy Regulator for a final determination at its June 29 meeting.
Eskom requested the “condonation” on the basis that it would be unable to meet certain requirements of the MYPD methodology, as updated in October 2016, as well as certain Mirta requirements.
Eskom described as “untenable” the requirement that the utility provide a breakdown of “coal volumes burnt per station, per contact type and per supplier” and indicated that its request for condonation relating to primary energy would be “ongoing, until the methodology is revised”.
Both Business Unity South Africa (Busa) and the Organisation Undoing Tax Abuse have criticised Eskom for seeking to deviate from the methodology, with Busa arguing that it was an attempt by Eskom to motivate for price increases without justification.
The business organisation also criticised Nersa’s handling of the request, which it suggested should have been subjected to a public hearing.
In response, Nersa said it viewed the invitation for written comments as “appropriate” and in line with the Promotion of Administrative Justice Act.
“The Promotion of Administrative Justice Act embodies notice and comment as one of the mechanisms available to an administrator to employ when affording interested and affected persons the opportunity to participate in its decision-making process. The Energy Regulator decided that the notice and comment process will satisfactorily meet the intended objectives and affords broader society [the opportunity] to participate,” Nersa said in a response to a question posed by Engineering News.
Eskom’s request to deviate from the methodology was made in a letter of conferment that it would be submitting a one-year revenue application for 2018/19, instead of a multiyear application. It had subsequently emerged that the utility would be seeking a 19.9% hike for the period.
However, the letter predated a Supreme Court of Appeal (SCA) ruling, which upheld an appeal by Nersa and Eskom relating to the implementation of a revenue clawback mechanism, known as a regulatory clearing account (RCA).
Eskom immediately argued that the judgment opened the way for the regulator to consider two RCA applications that had been held in abeyance after the North Gauteng High Court ruled in August 2016 that Nersa’s approval of Eskom’s RCA application for 2013/14 had been unlawful.
It was also not immediately clear what the impact on Eskom’s 19.9% revenue application for 2018/19 would be in the event that Nersa did indeed consider the outstanding RCA applications. Eskom was seeking to recover a combined R40-billion for the two years in question.
Nersa said it was still studying the SCA ruling’s implications and that it would “pronounce on the way forward in due course”.