Dear Nersa, we cannot comply – Eskom

Eskom will on June 1 submit a tariff application to energy regulator Nersa for 2018/19, but has warned in advance that it won’t be able to supply a long list of information required in support of the application.

This list, Eskom CFO Anoj Singh says in a confidential letter dated March 23, is not exhaustive.

Nersa earlier made drastic changes to the rules for approval of Eskom’s tariff applications in an apparent effort to improve oversight over Eskom’s coal purchases. In terms of the new rules, Eskom is required to disclose more detail about its coal use.

This came amid allegations of corruption with coal contracts.

Nersa has now published Eskom’s request to be exempted from some disclosure requirements. It has also published a short discussion document, giving context to the Eskom letter and has asked stakeholders to comment by May 18.

This also comes after an earlier judgment that set aside the Nersa decision to grant Eskom an interim tariff increase last year, due to non-compliance with the prescribed methodology.

Judge Cynthia Pretorius in her judgment a year ago, said if Nersa decided to deviate from the prescribed methodology, it should have consulted its customers about the proposed deviation.

Eskom and Nersa’s appeal against Pretorius’ judgment was heard last week and the court has reserved judgment.

During its recent electricity sub-committee meeting, Nersa members referred to court rulings against the regulator and subsequently decided to publish Eskom’s request and the discussion document for comment.

In the discussion document, Nersa says it gave Eskom permission in February to submit a one-year tariff application for 2018/19 instead of a full multi-year application (MYPD4). The previous tariff determination (MYPD3) was for five years and ends on March 31 2018.

Nersa says Eskom in its letter asks Nersa to condone its non-compliance with the methodology, which it is empowered to do, taking into account the extent of the non-compliance, the reason for it, how it will affect the achievement of the purpose of the MYPD methodology and the prejudice to Eskom, the public and the economy of Nersa’s decision.

The list of information Eskom says it cannot supply, includes segmented cash flow for the last reporting period, certain detail regarding assets, depreciation, capital expenditure, deferred debits and credits, coal purchases, coal handling costs and sales revenue and demand forecasts.

Singh says in the letter: “This list is not meant to be exhaustive and it is possible that further challenges may be uncovered as Eskom delves into the details for the Revenue Requirement Application.”

During their discussion at the electricity sub-committee meeting, Nersa regulator members were critical of the open-endedness of Eskom’s request.

Singh does say in the letter that Eskom will try to meet the requirements “as far as is reasonably feasible”. He says Eskom will nevertheless provide enough information to enable a proper analysis of its application and suggests a meeting between Eskom and Nersa officials to address the requirements over the short and longer term.

He states that Eskom did earlier point out in its comment before the MYPD methodology was finalised, that the request for certain information was “untenable”. This includes coal volume burnt per power station, per contract type and per supplier.

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