Eskom’s proposed tariff hikes are under the spotlight this week as the power utility presents its case to the National Energy Regulator of South Africa’s public hearings.

At the first of the countrywide public hearings held on Monday in Cape Town, Eskom presented its case to recover costs already spent in the provision of electricity totalling R66.6 billion, while allaying fears that this application would lead to a 30% tariff increase.

Sound regulatory environment

According to Phakamani Hadebe, Eskom’s interim Group Chief Executive, the utility’s sustainability depends on a sound regulatory environment that is aligned with existing Nersa rules and other legislative requirements.

“We therefore rely on Nersa to review our application in line with the multi-year price determination (MYPD3) methodology, which is a globally-accepted regulatory principle that reconciles variances between the projected and actual revenue, and costs that Eskom incurred for certain elements,” Hadebe said.

Money spent on service delivery  

The regulator began its hearings into Eskom’s Regulatory Clearing Account (RCA) applications for financial years 2014/15 to 2016/17 from 16 April to 11 May 2018. Eskom’s applications total R66.6 billion.

Hadebe said the application is based on the decision already taken by Nersa on the utility’s first RCA application for 2013/14.

“We have spent the money in the implementation of our mandate of providing electricity to South Africans by raising debt, as it was not included in the revenue decision and need to repay those loans accordingly in order to ensure credibility with our lenders,” he said.

Covering costs incurred prudently

Hadebe further emphasised that Eskom’s application only covers costs that were incurred efficiently and prudently as allowed by the RCA mechanism.

“We are aware and mindful of people’s concerns. It is therefore important to note that Eskom is on a path of recovery on governance issues that have marred our organisation in the recent past. The new board appointed in January 2018 has been embraced by the public and investor, and is focusing on operational and financial stability and clearing governance issues by bringing all those engaged in fraud and corruption to account.”