NERSA rejection of tariff proposal would destroy the electricity industry – Eskom

Eskom recently warned that NERSA’s rejection of their most recent tariff application may result in the energy generator requiring a R300bn bailout from the government. Now, MyBroadband reports that the SOE’s General Manager of Regulations said that if Eskom cannot “recover its efficient costs, it will have to rely on taxpayer funds to cover the yearly R3 billion shortfall.” The energy generator released a statement noting that the rejection of the MYPD 5 application has “created a regulatory vacuum for the electricity supply industry in South Africa.” MyBroadband notes that if this is not resolved before mid-March, “it would create a situation where Eskom and municipalities would not be legally allowed to charge for electricity at all.” Read the original article, “If the consumer doesn’t pay, then the taxpayer needs to pay” — Eskom. Republished with permission of MyBroadband. – Jarryd Neves

“If the consumer doesn’t pay, then the taxpayer needs to pay” — Eskom

By Myles Illidge*

Eskom hit back at the National Energy Regulator of South Africa (Nersa) over the recent rejection of its tariff proposal. It said the decision would destroy the electricity industry — including municipalities.

Hasha Tlhotlhalemaje, General Manager of Regulations at Eskom, has said that if the electricity generator cannot recover its efficient costs, it will have to rely on taxpayer funds to cover the yearly R3 billion shortfall.

In a conversation with Bongani Bingwa on 702, Tlhotlhalemaje commented on the impact Nersa’s rejection of the tariff proposal would have on the South African taxpayer.

“We are trying to get the consumer to pay only its efficient costs of electricity,” she said.

“If the consumer doesn’t pay, then the taxpayer needs to pay.”

Tlhotlhalemaje refused to confirm rumours that Eskom requested a double-digit percentage tariff increase.

According to Tlhotlhalemaje, Eskom made its application in June 2021 in terms of the prevailing methodology to give Nersa six months to make a decision.

Nersa rejected Eskom’s fifth Multi-Year Price Determination (MYPD5) revenue application, as it was based on MYPD4 methodology, whose applicable control period ends on 31 March 2022.

“After due consideration of the rationality and legality of applying an expired MYPD4 methodology and whether this was in the public interest, the Energy Regulator rejected Eskom’s MYPD5 application,” Nersa said.

The energy regulator intends to base its future pricing calculations on a new procedure designed to take the “rapid transformation of the electricity sector” into consideration, including security concerns and private power generation.

“Nersa’s rejection of Eskom’s MYPD 5 application, has created a regulatory vacuum for the electricity supply industry in South Africa,” Eskom said in a statement last week.

If the situation is not resolved before mid-March, it would create a situation where Eskom and municipalities would not be legally allowed to charge for electricity at all.

According to Tlhotlhalemaje, Eskom is happy to engage in consultations regarding a new price-determination methodology, but timing is an issue.

“We have to have a decision by the middle of March 2022 to be implemented by 1 April 2022,” she said.

“Nersa is completely aware that Eskom also has statutory requirements before it can make an application, and that takes a significant amount of time.”

Eskom indicated that even if the new procedure is developed timeously, the energy producer will be unable to apply for implementation by 1 April 2022.

As a result, municipalities will be unable to charge electricity tariffs when new pricing is supposed to take effect at the beginning of July 2022.

Nersa has proposed that Eskom submit a provisional application for the 2022/2023 financial year “preferably based on the principles of the new approach under consideration”.

Read more:

(Visited 480 times, 8 visits today)