South Africa's cash-strapped power utility Eskom has defended its request for an additional R27-billion in tariffs, saying it needs to recover prudently-incurred costs for the financial year 2018/19.
At a public hearing in Cape Town on Monday, the first of a series the National Energy Regulator of South Africa (Nersa) will hold in all provinces, Eskom general manager for regulation Hasha Tlhotlhalemaje said the Regulatory Clearing Account (RCA) application was meant to deal with variances between what was assumed when the regulator made its decision on Eskom’s revenue application in 2018/19 and what actually materialised as the utility spent money "to fulfil its mandate to provide electricity".
The RCA is a monitoring and tracking mechanism that compares the costs and revenue assumptions in the multiyear price determination (MYPD) made by Nersa in awarding tariff increases to Eskom, versus the actual revenue and costs incurred by the utility.
In its presentation, Eskom said backward-looking mechanisms such as the RCA were internationally-accepted to allow utilities to retrospectively adjust for any over or under-recovery due to actual events differing from the initial assumptions, estimates and forecasts upon which revenue determinations were based.
This, it said, ensured fairness for both the utility and electricity consumers, with the under- or over-recovery catered for through adjustment to future electricity tariffs.
"This mechanism also applies to Eskom. Any revenue adjustments due to RCA are implemented within a period that is sustainable for Eskom and consumers," the company said.
"The period for recovery of adjustments pertaining to FY 2018/19, the subject of the current application, needs to consider the impact of approved RCA adjustments that Eskom has not yet recovered dating back to 2015."
Last year Eskom said Nersa's decision in March to award the utility lower tariff increases than it had applied for had left it with a shortfall of approximately R102-billion, worsening its financial sustainability.
Nersa granted Eskom tariff hikes of 9.41 percent, 8.1 percent and 5.22 percent for the financial years 2019/2020, 2020/2021 and 2021/2022 respectively, saying the decision balanced both the utility's interests and those of the public.
Eskom's application has met strong criticism, with the main opposition Democratic Alliance (DA) saying consumers simply cannot afford to pay 10 to 15 percent more for electricity.
Consumers are also angry that Eskom has implemented rotational powercuts for months as it failed to generate enough energy to meet demand. This, the DA said, saw South Africans experience over 418 hours of load-shedding in 2019 alone.
"The utility has been entirely unable to demonstrate that they can operate prudently and efficiently, with gross financial mismanagement and procurement processes that have not been competitive enough," the party's shadow minister of mineral resources and energy Kevin Mileham said.
"Eskom has demonstrated that it is wholly incapable of managing South Africa’s electricity supply. To allow an increase in the rate of their tariffs would only reward them for their failures," he added, urging Nersa to reject the application.