Eskom says modest R9m RCA request not a signal of alignment with Nersa on calculations

17th April 2024 By: Terence Creamer - Creamer Media Editor

Eskom says modest R9m RCA request not a signal of alignment with Nersa on calculations

The National Energy Regulator of South Africa (Nersa) has initiated consultations on Eskom’s latest Regulatory Clearing Account (RCA) application for the 2022/23 financial year, where Eskom is requesting R9-million, its lowest RCA application since the utility began making yearly submissions under the claw-back mechanism.

Given that the amount is less than 2% of Eskom’s allowable revenue for the year, Nersa is not required to undertake public hearings. Nevertheless, a consultation document has been published, with virtual hearings scheduled for August 2 and 4 and a decision expected by December 2.

Eskom indicates that the cost and revenue variances during the period were relatively modest largely because foregone revenue related to loadshedding during the period has not been included in the RCA.

GM for regulation Hasha Tlhotlhalemaje reports that the effect of loadshedding on Eskom during the period was about R20-billion, but that this amount has been excluded from the application as has been the case historically.

She also tells Engineering News that the relatively small variance does not reflect a growing convergence between Eskom and Nersa regarding RCA calculations, disputes over which have been the subject of legal action.

Eskom has reviewed all RCA decisions from 2014/15 to 2020/21 in court and court processes are still under way involving about R60-billion in what the utility alleges to be incorrect RCA decisions.

Tlhotlhalemaje says this view has been endorsed by a court judgment and order for the financial years 2014/15 to 2016/17 RCA decisions, which Eskom subsequently re-reviewed after Nersa failed to comply with the order.

Therefore, she does not view the current small variation as reflecting a growing convergence between Nersa and Eskom on the way the RCA mechanism is being implemented.

“Instead, the key variances make the difference; one of these being revenue related to loadshedding that has not been included in the RCA.

“Thus, an amount of approximately R20-bilion is not recovered, which has always been the tradition, but the amount is very extreme for this financial year,” Tlhotlhalemaje explains.

Eskom and Nersa also not yet aligned on the methodological approach that should be taken for the next round of tariff applications.

Nersa has approve Electricity Pricing Determination Rules (EPDR), which it wants to be implemented for the 2025/26 financial year.

Eskom, however, says the EPDR cannot be implemented as its fails to include a method for calculating tariffs and that the prevailing multiyear price determination, or MYPD, framework and methodology will, thus, have to be used.

“Eskom is complying with the court order that requires the use of whatever methodology is in existence in September 2023 for the revenue determination for 2025/26.

“The process is under way for a decision by Nersa in December 2024,” Tlhotlhalemaje tells Engineering News.