THE BLOG

Is Eskom Hustling To Achieve Another Tariff Increase?

What is Eskom trying to hide?

07/06/2017 03:59 SAST
Siphiwe Sibeko / Reuters
Electricity pylons are seen in front of the cooling towers at the Lethabo Thermal Power Station, an Eskom coal-burning power station near Sasolburg.

The rapidly escalating price of electricity in this country has far-ranging consequences from the poorest households to the biggest industries. The National Energy Regulator of South Africa (NERSA) will soon be making a decision on whether or not to allow Eskom to deviate from minimum information requirements in the utility's next tariff application. This information is important because it is necessary for thorough public participation, and indeed for the regulator to take a decision as to whether any tariff increase will be considered.

If we don't have the necessary information, how can a reliable decision be taken? More than that, what is Eskom trying to hide? Eskom is only requesting a tariff decision for 2018/2019, which is a deviation from the normal approach (which is to apply for a multi-year price determination). More importantly, the utility is subsequently applying to deviate from meeting certain information requirements of the methodology that enables the determination of tariffs.

Essentially Eskom is arguing that most of it systems and reporting measures cannot fulfill the requirements set out by the regulator. Instead of requesting additional time in order to remedy the identified gaps, Eskom is instead requesting to be exempt altogether from providing the required information. The power utility had more than enough time to prepare for new tariff applications, in fact, it had since the 1st of March 2016 to prepare information for its tariff application.

Eskom then requested an extension until the 1st of April 2017. In February of 2017, Eskom applied for a quasi-extension which effectively means that it will postpone its actual 10-year MYPD4 application. The delay tactics that Eskom is employing are clearly unacceptable, but the mere fact that the regulator keeps entertaining Eskom's requests baffles the mind.

To be frank, the last time the regulator bent its own rules to accommodate Eskom the outcome resulted in judicial review. The main outcome of the review was that procedural fairness was not observed and subsequently the decision by NERSA to grant Eskom a 9.4 percent tariff increase was set aside. The result of which is that a number of key tariff objectives are unachievable, namely; to ensure reasonable tariff stability; to appropriately allocate risk between Eskom and its customers; to provide a systematic basis for revenue/tariff setting, and to ensure consistency between price control periods.

It must be understood that Eskom does not act to address urgency as it materialises, instead, the utility ducks and dives and tries to avoid any and all transparency and accountability.

NERSA again is entertaining a process that undermines its own rules. If the problem is really about information, why can't Eskom request an extension of the MYPD3 period? The rules facilitate this in the form of a selective re-opener. The same information that was used to determine the tariff period of 2013 to 2018 will be applicable with marginal updates.

It must be understood that Eskom does not act to address urgency as it materialises, instead, the utility ducks and dives and tries to avoid any and all transparency and accountability. Eskom is in a state of exceptionalism, it is constantly seeking to undermine the regulator and to squeeze the South African public in order to survive. The numerous applications and scandals surrounding Eskom are a sign that the utility is no longer fit for purpose.

The problem is further compounded by the regulator's reluctance to keep to its own rules, which makes it complicit in this circular pathway in which the losers are the South African public. It surely cannot be too much to ask that Eskom follows due process, and discloses all of the information required to fully assess their tariff application, and it is critical that NERSA actually follows through and compels Eskom's transparency.