Delegates stand up to Eskom on tariff

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Nersa is in the process of holding public hearings on Eskom's revenue-clearing account, a mechanism that allows the utility to recover unanticipated costs that arose while generating electricity.

The costs are recovered from consumers retrospectively by adding them on to the next year's tariffs. However, in order to do so, the regulator must deem that the additional costs pass efficiency tests and were prudently incurred.

Eskom is claiming an additional R22.8bn from the 2013-14 year, which will amount to an 8.6% tariff increase. This would be on top of the 8% increase agreed for 2016.

Bukula said most submissions recognised the need for Eskom to be allowed some additional cost recovery through the tariff, but not the full 8.6%.

At the start of the public hearings in Cape Town on Monday, a Nersa panel interrogated Eskom's application, raising questions about the effect of the increase on the economy; Eskom's extensive use of diesel-powered turbines to keep on lights; and the reasons for and effect of lower sales volumes.

The R22.8bn Eskom makes claim to consists mostly of R11bn in foregone revenue because of lower than anticipated sales; an extra R8bn for the diesel-run turbines; and higher coal costs of R2bn.

Eskom chief financial officer Anoj Singh argued that the utility had considered the effect of the tariff increase on consumers and the economy. However, the power utility also had to balance the needs of other stakeholders and endeavour to place the company on a more sustainable footing.

"We did look long and hard at the implications on the economy, but we were also of the view that as Eskom, we have various stakeholders to take into account, not only the interests of consumers.

"We have a fiduciary duty to our shareholder, which is government, and we must demonstrate to investors that we can use the revenue-clearing account to improve the sustainability of the organisation," he told the Nersa panel.

Should Eskom's application not be viewed favourably by Nersa, then its credibility in the eyes of the investors would be undermined, Singh said.

Replying to questions on the use of the diesel-powered turbines, Theresa Smith, Eskom's corporate specialist in the system operator, said the utility's overriding concern was to keep the system stable.

She said perfect planning was difficult as decisions had to be made in the moment.

While it might not seem economical to use the turbines, the cost of load shedding or unserved energy was far greater to the economy, Smith said.

Stakeholders that made presentations to the panel on Monday included the City of Cape Town and the South African Local Government Association, both of which argued against granting the full 8.6% to the power utility.

In particular, the stakeholders singled out whether it was reasonable to expect future consumers to foot the bill for Eskom's lower sales in the past.

Executive director of electricity in the City of Cape Town, Dr Les Rencontre, said that making consumers pay more because Eskom had sold less electricity than expected effectively punished them for saving electricity in the first place.

Source: BDpro