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Eskom given 30 days to meet Nersa requirements for 2018 tariff application

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Eskom given 30 days to meet Nersa requirements for 2018 tariff application

Photo by Duane Daws

11th August 2017

By: Terence Creamer
Creamer Media Editor

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The National Energy Regulator of South Africa (Nersa) has refused Eskom’s request to deviate from key aspects of the multiyear price determination (MYPD) methodology, as well as the minimum information requirements for a tariff application (MIRTA) and has given the utility until the end of August to ensure that its revenue application for 2018/19 is compliant.

The State-owned utility is seeking a 19.9% hike from April 1, 2018, having been granted a 2.2% increase from April 1, 2017.

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As part of the application, Eskom requested permission to deviate from aspects of the updated MYPD methodology and the MIRTA, stating that it was not in a position to meet the revised information requirements.

This request was strongly opposed by several stakeholders, including Business Unity South Africa, which suggested that the request represented an attempt by Eskom to motivate for price increases without justification.

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Eskom requested exemption from the MYPD methodology with regards to: providing a valuation of its regulatory asset base (RAB); disaggregated primary-energy costs relating to coal volumes and handling, as well as water; and research and development.

In addition, it requested exemption from providing the MIRTA information relating to: segmented cash-flow statements; split of sales revenues between regulated and nonregulated industries; a projected ten-year sales forecast; and disaggregated line items such as RAB, coal purchases and burn, environmental levies and deferred debits and credits.

At its meeting on July 27, the Energy Regulator refused Eskom’s request with regards to most of the MYPD methodology and MIRTA items from which Eskom was seeking to deviate. However, it condoned deviation with regard the valuation of Eskom’s RAB, as well as information on deferred debits and credits.

“The condonation regarding the valuation of RAB was granted in respect of Eskom’s one-year (2018/19) revenue application. However, the Energy Regulator has instructed Eskom to revalue its regulatory asset base in time for its next MYPD application,” Nersa said in a statement.

Condonation regarding information on deferred debits and credits was granted on the basis that no decision had yet been made on the regulatory clearing account (RCA) balance. This condonation was granted on the basis that the RCA was still the subject to legal proceedings and that Eskom could, thus, deviate until the court pronounced on the matter.

“The Energy Regulator has given Eskom 30 calendar days from the date of the decision (27 July 2017) to comply with the MYPD Methodology and the MIRTA requirements where condonation has not been granted.”

In response to the determination, Eskom said it would implement the decision made by the Energy Regulator for the 2018/19 revenue application.

The utility noted that Nersa had offered guidance on how it should deal with assumptions for certain of the MYPD methodology and MIRTA requirements that could not immediately be met. For example, if Eskom was not in a position to attribute burn costs and volumes to particular contract types, the regulator would accept a purchase ratio for the coal-burn rate.

"Eskom will update the revenue application, with assumptions, as guided by Nersa for the relevant areas where condonation was not granted and submit to Nersa by 25 August 2017," the utility said in a statement, while calling for a timeous revenue decision in light of the fact that the MYPD 3 period ended on March 31, 2018.

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