Eskom will provide detail of coal purchases to Nersa

Eskom on Friday gave an undertaking that it would provide full details of its coal purchases to energy regulator Nersa.

This follows an earlier letter in which Eskom asked Nersa to condone its non-compliance with the requirements for information in support of its tariff application for 2018/19.

Eskom’s coal purchases amount to almost R50 billion per year. It has been in the spotlight recently against the background of allegations that the coal purchases have been manipulated to favour the controversial Gupta family.

Moneyweb earlier reported that Eskom wants electricity tariffs for 2018/19 to be increased by 19.9% for its direct clients and by 27.3% for municipalities. Eskom formally submitted the application to Nersa last month despite the fact that it doesn’t contain all the required information.

Nersa earlier indicated that it would have decided about the condonation by May, but this has been delayed after Nersa put it to the public for comment, including a public hearing on the matter on Friday.

Eskom has urged Nersa to start processing the application and receive some of the outstanding information as it becomes available, to ensure the tariff determination is finalised before the end of the year. Any delay into the new year could disrupt the municipal budget preparation for 2018/19 as the budget process is strictly legislated with prescribed timelines.

In its earlier letter to Nersa Eskom included a table with required information it could not give to Nersa and reasons for non-compliance. This list it stated, was not exhaustive.

Under the heading: “Coal Purchase and Burnt” it listed the following information: “Aggregate coal purchases; volumes; price per ton; and costs per contract type”.

It did not give reasons for its failure to provide details about coal purchases, but explained that the provision of coal burn figures per contract type is problematic as it is impossible to separate coal from different suppliers or categories when it is burnt.

On Friday Eskom said it would provide Nersa with full detail of coal purchases as it says it has done in the past, but maintained that the provision of coal burn figures in the format the Nersa requires will be problematic.

Even if Eskom provides the numbers to Nersa, it does not automatically follow that it will be made public. Nersa normally gives Eskom an opportunity to remove or block out commercially sensitive information before tariff applications or similar documents are published for public comment.

Eskom on Friday gave an undertaking that it will provide Nersa with a new valuation of its Regulatory Asset Base before it makes the tariff determination. The utility stated that the new methodology for determining its tariffs was only finalised in October last year, which did not leave it with enough time to do a new valuation before submitting its 2018/19 application. The valuation is currently being done.

The Minimum Information Requirement for Tariff Applications (MIRTA) is merely a guideline and non-compliance is not necessarily fatal to an application, Eskom maintained. The utility gave the assurance that it would provide Nersa with enough appropriate information to enable it to assess the tariff application.

Deputy chair of Business Unity SA (Busa) energy sub-committee Jane Molony expressed the organisation’s concern about ever-increasing electricity costs. She said the integrity of the tariff determination process is essential to maintain confidence in the regulator and requires information transparency.

She pointed towards three items of Eskom’s non-compliance that Busa considered acceptable, but maintained thirteen more were unacceptable.

Molony said Busa believes the rule of law should be applied consistently in every situation and therefore the regulator should ensure compliance with its rules and requirements.

Spokesperson for Greenpeace Africa Happy Khambule expresses the organisation’s doubt of whether Eskom is even permitted under the current methodology to apply for a single year tariff increase. “There seems to be no rule that allows for such an application, notwithstanding that fact that Nersa granted Eskom the leave to submit a one-year revenue application for 2018/19,” he said.

Greenpeace called on Nersa to reject Eskom’s request for condonation.

Organisation Undoing Tax Abuse (Outa) director of electricity Ted Blom called Eskom a “corrupt cesspool of ongoing crime” and called for the rules for the tariff determination to be strictly applied.

He said the information Eskom alleges it is unable to provide should be readily available to manage the utility on a daily basis. If it isn’t, it raises questions about Eskom being an efficient operator as required in the legislation.

Nersa full-time member for electricity Mbulelo Ncetezo who chaired the hearing was unable to give a clear timeline for the regulator to decide whether to grant Eskom condonation. He said a decision might be announced in September.

Brought to you by Moneyweb