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Eskom shock: ‘Errors’ could push up electricity prices by 50%

2019-02-25 00:49

Chief financial officer at power utility says energy regulator Nersa’s adding errors and missing emails could substantially push up electricity prices.

A few alleged adding errors and missing emails could cost electricity consumers billions of rands and push up electricity prices by as much as 50%.

Eskom spells out these mistakes – allegedly made by energy regulator Nersa – in a new application which has been launched in the Pretoria High Court.

In the papers Eskom alleges it has been done in to the tune of nearly R34 billion.

Eskom claims it should have been allowed to collect this amount from consumers, but was prevented from doing so by Nersa’s alleged mistakes.

Nersa did not react to requests for comment sent to it by City Press’ sister publication Rapport.

This new court case comes after another application by Eskom late last year to review the tariff increases Nersa granted Eskom.

Economist Mike Schüssler estimates that if the two court cases are successful, the price of electricity could rise by as muchas 50%.

However, the regulator would also have the option of phasing the increases in over a period of a couple of years.

The new court case is about three decisions made by Nersa in terms of the regulatory clearing account (RCA).

The RCA is a mechanism to manage risk in the determination of tariffs.

In the event that the assumptions on which the tariff decision is based do not realise, then Eskom can correct the over- or undercollection through the RCA.

Eskom initially applied for the sum of R66.6 billion in terms of the RCA for 2014/15, 2015/16 and 2016/17.

However, Nersa awarded Eskom only R32.69 billion.

Eskom is now alleging that the enormous difference is as a result of various mistakes:

. Nersa penalised Eskom for lower electricity sales as a result of load shedding, but Eskom said this adjustment was done twice. That allegedly cost Eskom R1.2 billion;

. The same adding error was allegedly made with the cost of coal. Eskom said it had already subtracted the reduced coal use in the RCA application it submitted, but Nersa subtracted it again. This was a further R12.7 billion that Eskom lost, it claims;

. In a further case Eskom, said experts, had copied a figure incorrectly. In one document it is indicated as R1.3 billion, but when it was transferred to another table to be calculated, the figure was totally different. This allegedly cost the power utility a further R1.7 billion; and

. Nersa cut Eskom’s application by nearly R13 billion because no supporting documentation was received for capital expenditure in respect of the transmission and distribution network.

Eskom, however, attached the emails with the supporting documents to its court papers and claims it does not know how Nersa could have failed to receive the supporting documentation.

Calib Cassim, chief financial officer at Eskom, said in his affidavit before the court that Nersa put Eskom on the road to ruin with these mistakes.

He said in the time it took Nersa to consider its RCA applications and during which the above mistakes were made, Eskom’s debt had risen to R426 billion.

This amount, which Cassim last week attested to under oath, is higher than the figure of R419 billion, which had been quoted until now.

Cassim said Eskom’s debt would rise to R700 billion by 2023.

The figure that Eskom had been using to date for its debt by 2027 was R600 billion.

In his latest affidavit Cassim reveals that Eskom has already used R337 billion of the R350 billion in state guarantees and is negotiating for a further R13.6 billion.

This means it would have no further state guarantees at its disposal, something that would make its further funding programme more tricky.

This week Minister of Finance Tito Mboweni made a further R23 billion a year available to Eskom for the next three years to help with its troubled financial position, but he did not say anything about further guarantees.

Cassim said in his affidavit that Eskom would have only R9 billion in cash by the end of March, less than half of its earlier internal target of having a R20 billion liquidity buffer.

Nersa would have to decide on Eskom’s present tariff increase application of more than 15% a year for the next three years.

Another RCA application is outstanding and Eskom is fighting the tariff increase of 5.23% which was granted by Nersa in April last year. Eskom asked for 19.9%.

A court date has not yet been finalised for Eskom’s two applications to be heard.


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June 16 2019