Photo by: Bloomberg
The National Energy Regulator of South Africa's (Nersa's) decision in March to award State-owned power utility Eskom lower tariff increases than it had applied for, leaving it with a shortfall of approximately R102-billion, has worsened its financial sustainability, the company said on Friday.
Nersa said cash-strapped Eskom could raise tariffs by 9.41 percent, 8.1 percent and 5.22 percent for the financial years 2019/2020, 2020/2021 and 2021/2022 respectively.
It said at the time the decision balanced both Eskom’s interests and those of the public in line with South Africa's Electricity Regulation Act.
In a statement on Friday, Eskom said Nersa had decided to offset envisaged government support of R23-billion per year against the return on assets. This, it said, resulted in the return on assets in the decision being approximately negative one percent for each of the financial years.
Following analysis of the reasons for the decision, the Eskom board had decided to take the matter to court.
"Consequently, we have put in an application for urgent interim relief, which is necessary to avoid financial disaster for Eskom," chief financial officer Calib Cassim said.
"We are seeking an order to address this shortfall in a phased manner. In addition, we are seeking the court to review and set aside Nersa’s MYPD4 (fourth multi-year price determination) revenue decision and remit that decision to Nersa for reconsideration in the light of the Court’s judgment.”
Cassim said Eskom had provided sufficient details during public hearings on the impact of the continuous shortfall between allowed revenue and efficient and prudent costs for many years.
"The MYPD4 decision has exacerbated the situation further and raises questions about Nersa’s commitment to implementing its mandate that requires considering the balance between the impact on consumers with Eskom’s sustainability when making revenue decisions,” he added.