OUTA welcomes NERSA's promises of better oversight on Eskom
Eskom didn’t get the price
increases it wanted, but OUTA believes it still received more than it deserves.
This is also a decision
which reflects the lack of a coherent strategy by Government on Eskom’s future
and the pricing path, as NERSA apparently didn’t consider the effect of the
R23bn-a-year bailout over the next three years.
direction from either the Presidency
or the Department of Energy. Government is talking restructuring of Eskom but
if it was serious about this it should have interacted with NERSA, without
compromising the independence of NERSA, which should have allowed the prices
for the two outer years to be reassessed in the light of the effects of the
restructuring,” says Ronald Chauke, OUTA’s Portfolio Manager on Energy.
Government could have given NERSA an indication of what that bailout will be spent on and details of the restructuring, so NERSA could consider this in the pricing application.
Eskom had asked NERSA for increases of 15% a year, then upped this to 17% for 2019/20.
NERSA granted increases for the next three years of 9.41%, 8.10% and 5.22%. The increase for the previously approved RCA clawback also runs over those three years, which brings the 2019/20 increase to nearly 14%. An RCA clawback was also approved today for 2017/18, much lower than Eskom had requested, but this has yet to be calculated into the prices.
“It’s a steep increase, 14% is huge. It’s going to hit customers hard and the issue of failure to pay electricity bills will be exacerbated,” says Chauke.
NERSA did not provide detailed reasons for the decision.
OUTA welcomes NERSA’s decision to review Eskom’s costs, efficiency and performance, its undertaking to independently value Eskom’s Regulatory Asset Base (RAB), to conduct performance audits on the power stations. These are issues which affect the prices. OUTA has repeatedly criticised the RAB valuation as way too high, and this has a substantial impact on prices.
NERSA said it is considering investigating Eskom’s governance failures and adjusting prices accordingly based on this or the outcome of investigations by other authorities. OUTA urges NERSA to do this.
“OUTA looks forward to the quantifying of the cost of corruption. If this is done properly it should also bring prices down. We expect this to be done with the urgency it deserves,” says Chauke.
This is expected to be a considerable sum, as the SIU is investigating the theft of R170bn from Eskom, including R139bn linked to the building of Medupi, Kusile and Ingula power stations.
OUTA had objected to the tariff hikes, submitting objections to NERSA during the public participation process. OUTA is encouraged by the massive public participation in this process – NERSA received more than 119 000 written comments from the public.