ESKOM has applied for permission to levy electricity tariffs by up to 16,6 percent next year.
At present, it is allowed to charge tariffs of eight percent for 2016, which are well below cost-recovery levels.
Tariffs that are not cost-reflective are a drain on Eskom’s sustainability.
A mechanism known as the regulatory clearing account allows Eskom to apply to the National Energy Regulator of South Africa (Nersa) to claw back some of its costs retrospectively.
This is because tariffs are formulated on the basis of projections, and once audited, some adjustment to the projections may be required.
These costs can then be recovered from consumers by adding them on to the following year’s tariff.
Eskom said on Thursday it had applied to Nersa to claw back R22,8 billion (US$1,6 billion) from the 2013-2014 financial year.
Nersa will determine how much of the R22,8 billion Eskom can recover based on efficiency tests.
Costs that are determined to be essential can be recovered, while those that were wasteful operations or broke the efficiency rules may not be.
Nersa spokesman Charles Hlebela said should Nersa decide that Eskom was justified in recovering the full R22,8bn from consumers, then electricity tariffs next year would rise to 16,6 percent.
But in the past Nersa has been hard to please.
In the original multi-year price determination for the period 2013-14 to 2017-18 Eskom was granted only eight percent of the requested 16 percent tariff hike.
A year ago, it allowed Eskom to recover less than half of what it had claimed through the regulatory clearing account. This raised tariffs from eight percent to 12,7 percent for this year.
In June, it turned down Eskom’s “selective tariff reopener” entirely. Had the re-opener been granted, tariffs would have risen 25,3 percent.
In turning it down, Nersa advised Eskom to either file a new application or use the regulatory clearing account to enable higher tariffs.
Nersa said in a statement on Thursday that Eskom’s application could go either way.
“Should the results of the assessment indicate that Eskom has to reimburse the customers, the price of electricity would have to decrease proportionally to the regulatory clearing account balance. Similarly if the customers have to reimburse Eskom, the price would have to increase.”
Public hearings will be held to inform the decision.
The fact that it costs Eskom more to generate and distribute energy than it is able to recover from customers is a constraint on its financial health.
At the time the 2013-14 to 2017-18 price determination was announced, Eskom estimated that it would have a R225 billion revenue shortfall over the period.
Since then, it has received an equity injection allowing it to borrow more and was allowed to raise tariffs this year by 12,7 percent.
On Monday, Eskom CE Brian Molefe will provide an update on the state of the electricity system. — Business Day SA
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