Nersa fed up with Eskom's intransigence

The National Energy Regulator of SA (Nersa) is so tired of Eskom’s “lack of cooperation” that it wants to drag it before a tribunal that has the power to fine the state-owned power utility R20 billion a day.

At a Nersa conference – held on Wednesday and attended by City Press’ sister publication, Rapport – things came to a head when Nersa officials suggested that a tribunal be established to challenge Eskom for allegedly obstructing Nersa and its work.

The drastic recommendation of a tribunal came just a day before Eskom again had to turn out the lights to prevent the country’s electricity grid from collapsing.

According to correspondence that Rapport has seen, Nersa has for some time been trying to conduct an audit of Eskom’s power stations to gain first-hand knowledge of the reasons that the beleaguered state-owned entity cannot keep the lights on.

In correspondence between Nersa and Eskom, the regulator makes it clear that its audit will focus on how Eskom manages its planned maintenance and unexpected breakdowns; on what it is doing about underperforming power stations; and on the construction work carried out at Eskom’s new Medupi and Kusile power stations.

Eskom has strongly objected to the audit on technical grounds, but some Nersa officials say the power utility is reluctant to cooperate because the audit could further eat into its income.

Eskom has denied being opposed to the audit, saying it is merely concerned that Nersa comply with the rules regarding the audit.

The power utility is entitled to earn income through electricity tariffs to fund “effective operations”. So, if it is spending money on fixed costs for power stations, but the power stations are not delivering electricity as a result of Eskom’s incompetence, Nersa can refuse permission to Eskom to recover the money from consumers.

When it comes to the embattled power utility’s application for a tariff increase for the next three years to 2022, the availability of Eskom’s power stations has become a thorny issue.

Eskom’s application was initially based on the assumption that its power stations could deliver at 78% of their capacity for the three years ending in March 2022.

The assumption was therefore that the stations would be “effective” and that costs could be recovered.

But Nersa called the 78% availability rate unrealistic and amended it to 71.5% in the current financial year, 72.5% in 2020/21 and 73.5% in 2021/22.

But even these figures may have been too optimistic as Eskom’s current availability rate for 2019 is 67.96%.

At Wednesday’s meeting, Nersa officials said that Eskom’s dubious performance with regard to its power stations was all the more reason for the regulator to push on with the audit.

Despite a meeting having taken place between the two parties, and various letters having been exchanged, there has been no further progress.

“We have exhausted all our options [in trying to obtain Eskom’s cooperation],” Nersa’s committee members were told. On Wednesday, they decided to ask Eskom for its cooperation one last time and, to this end, wrote a letter to the power utility.

If the letter bears no fruit, the decision to proceed with the tribunal has already been made.

Eskom said that Nersa was welcome to do an audit, provided that it used the correct standards and did not exceed its powers. The power utility added that it shared the availability rate of its power stations whenever it submitted a price adjustment application to Nersa, and would continue to do so.

However, said Eskom, Nersa could not use an audit to bully the utility.

“Audits must be done according to a specific guideline,” said an Eskom spokesperson.

“Eskom requested this information from Nersa, but Nersa changed its mind and decided that it wanted to audit Eskom’s progress according to the assumption of the current three-year tariff decision.”

There is increasing tension brewing between the beleaguered power utility and Nersa.

Rapport previously reported that Eskom had various court cases pending against Nersa and hoped to recover at least R100 billion in additional income from consumers.

The first application is expected to be heard early in December. If successful, it will mean that electricity tariffs could increase by about 16% over the next two years, instead of the approximately 8% and 5% increases, respectively, that Nersa approved.

According to Eskom, Nersa has made serious errors – including addition errors – in its tariff determinations and is simply trying to “punish” Eskom.

Last week, Nomfundu Maseti, Nersa’s acting regulatory member for electricity, hit back in answering court papers and said that Eskom had only itself to blame for its problems and that the utility had to lower its costs to escape the death spiral it was locked into.

She said that as an independent regulator, Nersa had the discretion to decide on Eskom’s tariffs. To do so, it had to weigh up the interests of the power utility, the public and the country’s economy, rather than strictly adhering to prescribed guidelines.

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