22 July 2022
Eskom is again taking the National Energy Regulator of SA (Nersa) to court, this time for “mistakes” and “financially impossible” conclusions that the regulator reached in determining Eskom’s tariff increase for 2022/23.
In February, Nersa awarded Eskom a 9.6% tariff increase, far below the 20.5% requested.
Nersa released the detailed reasons for its decision last month. On examining the document, Eskom CFO Calib Cassim said that he found Nersa’s reasoning deeply flawed and it could not be left unchallenged.
Eskom has taken Nersa’s decisions on review on numerous occasions over the last three years and won each time. Each time that Eskom overturns a tariff decision in its favour, it can add the increases it has foregone to tariffs for future years.
Nersa determines the electricity tariff based on a formula that takes account of costs that the company will incur in producing energy – such as primary energy costs and labour – as well as a reasonable return on its assets. The return on assets, which is based on the value of its power stations, less depreciation, is particularly key as it enables Eskom to charge tariffs that are more reflective of its operational costs and also takes account of the need for new investment.
In an interview on Wednesday, Cassim said that Nersa “is so blatantly wrong that we have review it.” Not only could the valuation be used in future years but it has implications for how Eskom’s balance sheet is viewed by auditors and funders.
If Eskom succeeds in its review, the outcome will change the 9.6% tariff.
Source Fin24
