Business News 22.3.2018 08:59 am

SA electricity advisory accuses utility Eskom of trying to pass costs from corruption to consumers

SA electricity advisory accuses utility Eskom of trying to pass costs from corruption to consumers

Nersa last December granted Eskom a 5.2 percent tariff increase for 2018-19, effective from April 1, 2018, against the 19.9 percent Eskom had applied for.

A South Africa electricity export on Thursday accused power utility Eskom of trying to recover losses from corruption by further increasing tariffs levied on consumers by an estimated 30 percent before the end of 2018.

The National Energy Regulator of SA (Nersa) last December granted Eskom a 5.2 percent tariff increase for 2018-19, effective from April 1, 2018, against the 19.9 percent Eskom had applied for.

In January the regulator in January published Regulatory Clearing Account (RCA) applications by Eskom to further increase tariffs to recover R66.6 billion lost between 2014 and 2017. Nersa gave the public until March 23 to submit comments on the application.

The RCA is a monitoring and tracking mechanism that compares “uncontrollable” costs and revenues assumed in the multiyear price determination (MYPD) made by Nersa, to actual revenue and costs incurred by Eskom.

But critics say the power utility is trying to make consumers pay for losses incurred through the corrupt activities of senior company executives.

On Thursday, energy expert Ted Blom, a partner at Mining & Energy Advisory, said despite massive corruption, inefficiencies and irregular expenditure, Eskom still showed a bottom line profit of over R20 billion before the RCA claims from 2013 to 2016.

“The defective MYPD rules also encourage Eskom to overspend – as overspending is, in most instances, completely recovered from the public via the same RCA provisions,” Blom said.

“Effectively, Eskom will never run at a loss as any shortfall is recovered through a flawed annual RCA application. In other words, Eskom recovers any shortfall in projections by increasing consumer’s tariffs the following year. This increase is over and above annual tariff increases.”

Blom said Nersa had not been conducting its oversight and regulatory duties diligently.

“If Nersa approves Eskom’s RCA application for 20114/15, 2015/16 and 2016/17… it will result in an electricity tariff hike of some 30 percent. And that will, in turn, result in further enterprise closures, bankruptcies and job losses,” he said.

“Thus the public will merely continue funding the Eskom gravy train and the effects will compound over time.”

– African News Agency (ANA)

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