The National Energy Regulator of South Africa (Nersa) has initiated a public consultation process on two Eskom applications.
The first application is the regulatory clearing account (RCA) application of R21.6-billion for the fifth year (2017/18) of the multiyear price determination (MYPD) 3 period, which is a backward-looking application.
The Nersa MYPD methodology requires Eskom, after financial year-end, to submit its RCA application based on efficient and prudent costs reflected in audited financial statements.
RCA is an account in which all potential adjustment to Eskom’s allowed revenue, which has been approved by Nersa, is accumulated and managed.
This methodology enables Eskom to adjust for the over, or under, recovery of preceding years’ regulated costs and revenues through the electricity tariffs in subsequent years.
The second application is the MYPD 4 revenue application of R219-billion for 2019/20, R252-billion for 2020/21, and R291-billion for 2021/22.
Eskom, in this revenue application, has applied the Nersa MYPD methodology, with a smoothed price path over the MYPD 4 period by phasing-in of the return on assets.
The phased implementation, Eskom explained, was adopted to ensure that by only the third year – 2021/22 – will the allowed revenue cover the full debt service commitments.
This revenue requirement would correspond to a phased 15% average price increase for each year of the MYPD 4 period. However, the allowed revenue being applied for does not cover the entire debt commitment cost, equating to a cash shortfall for the 2019/20 and 2020/21 years.
Eskom said it would use the proceeds from the liquidation of the MYPD 3 RCA decisions to contribute to mitigating the debt service shortfalls.