The National Energy Regulator of South Africa (Nersa) has formally initiated the process of adjudicating Eskom’s next tariff increase with the publication of a consultation paper on the utility’s allowable revenue application for 2023/24 and 2024/25.

The paper includes a proforma tariff calculation indicating that Eskom’s tariff could increase by as much as 38.1% on April 1 next year, followed by a further 5.12% increase in 2024/25.

The regulator typically does not grant Eskom the full allowable revenue for which it applies, but in recent years the utility has made several successful court applications against the regulator in which it has shown that Nersa has not properly applied its methodologies.

The calculation in the consultation paper includes an application made by Eskom for R317.7-billion in allowable revenue to be recovered from standard-tariff customers.

This arises from a June 2021 application made as part of Eskom’s three-year fifth multiyear price determination (MYPD5) submission.

The first year of that MYPD5 application was adjudicated only after the intervention of the courts and, in February, Nersa said Eskom’s tariff could rise by 9.61% on April 1.

The increase was less than half the 20.5% hike for which Eskom had applied.

In addition, Nersa’s 2023/24 calculation includes two regulatory clearing account (RCA) amounts totalling R14-billion (of which R3.5-billion has been approved to date) and a R15-billion amount, arising from a legal settlement associated with Nersa’s illegal removal of a R69-billion equity injection from Eskom’s allowable revenue in 2019.

The settlement stipulates that Nersa must add R15-billion to Eskom’s allowable revenue for the financial years 2023/24 to 2025/26, as well as a further R14-billion in 2026/27 to remedy the exclusion of the injection.

The publication of the consultation paper follows a court order, issued in July, stipulating that Nersa adjudicate the 2023/24 application under the existing MYPD methodology and make a final determination by December 24.

Nersa indicates that it intends announcing its decision on November 7, having given stakeholders until September 8 to make written comments, after which public hearings will be held from September 19 to September 23.

In parallel, Nersa is consulting on a new methodology for setting electricity tariffs to replace the MYPD methodology, which it initially intended finalising by September 30.

In response, Eskom has highlighted that the sweeping changes being proposed depart from cost-to-serve methodologies used internationally and, thus, recommends that an iterative approach be adopted to any change.

It has also called for an impact assessment to be undertaken before any new methodology is implemented.

Nersa has since clarigied that it does not intend pursuing a “big bang” approach to implementation after September 30 and will instead seek to phase in the new approach “to ensure predictable electricity prices”.