There are growing indications that State-owned power utility Eskom is starting to look beyond the National Energy Regulator of South Africa’s Regulatory Clearing Account (RCA) for solutions to its financial problems.

Through the RCA mechanism, Eskom has already clawed back R7.8-billion relating to expenditure incurred during the second multiyear price determination period (MYPD2), which means that the tariff will rise by 12.7% from April 1, 2015, instead of the 8% originally sanctioned by the regulator. It is also understood that Eskom is preparing subsequent RCA applications relating to the current MYPD3 determination period.

However, the utility remains unconvinced that this, together with the R20-billion injection promised by government, will be sufficient to close a revenue shortfall that is estimated at over R220-billion. Indeed, it is already looking for a further R3-billion short-term budgetary fillip from government to help it buy the diesel it needs for the final two months of its financial year, which ends on March 31.

Eskom CEO Tshediso Matona has also, on more than one occasion, insisted that there is already broad agreement on the need for cost reflectivity. However, he has also admitted that, despite recent engagements with the regulator, there is still no alignment on how the transition should be managed.

The shareholder, which is facing financial headwinds of its own, as lower economic growth exacts a toll on revenue, has also confirmed that it is supportive of Eskom’s plans to secure cost-reflective tariffs.

In a recent interview with Engineering News, Matona acknowledged that the RCA mechanism was but one instrument being interrogated, while also stressing that no decision had been made on an application to reopen MYPD3 determination – the another key lever available to the utility.

There was “agreement”, he said, on the need to shift towards cost reflectivity, but still no “convergence” on how that shift should be managed and over what period. “We need convergence on what work needs to be done to create the basis for [cost-reflective] tariffs to be implemented,” he averred.

Such a work programme, Matona indicated, would need to offer visibility of the scenarios through which Eskom’s financial problems – including the fact that it remained the supplier of last resort – as well as the needs of the economy could be addressed.

“We need a thoroughgoing review of the regulatory framework, with the intention of recalibrating it to the current reality,” he said, adding that Eskom would, simultaneously, be assessing ways of increasing its nonregulated revenues and re-engineering its financial model.

The bottom line, though, is that South Africans are being warned to not only be prepared to live with unstable electricity supply for some time, but also to prepare for even higher power prices to come.