REGULATORY CLEARING ACCOUNT
Court allows Eskom to approach Nersa on tariff adjustments
The outcome has no bearing on tariffs as they stand, but will mean that in the future Eskom will ask for claw-backs from past years
Eskom can once again submit applications for tariff adjustments to the National Energy Regulator of SA (Nersa) through a mechanism called the regulatory clearing account, following a Constitutional Court ruling last Friday.
In terms of the tariff-setting methodology, Eskom is able to retrospectively ask Nersa to claw back additional tariffs from consumers in the event that its costs were justifiably higher than anticipated when Nersa granted the original tariff application. If approved by Nersa, the claw-back is then added to the forthcoming year’s tariff.
The methodology was thrown into doubt by a court ruling last August in which Nersa’s ruling on the 2013-14 regulatory clearing account application was set aside by the court because the regulator had not followed the correct methodology. That obstacle is now removed by a Constitutional Court ruling that affirmed a ruling of the Supreme Court of Appeal in June.
The outcome has no bearing on tariffs as they stand, but will mean that in the future, Eskom will ask for claw-backs for the four years 2014-15 to 2017-18, which will be added to approved tariffs going forward. Had Nersa lost the case, then Eskom would have had to refund consumers for the portion of the tariff derived from the regulatory clearing account in 2013-14.
Eskom spokesman Khulu Phasiwe said: "Between Eskom and the customer, no one owes anybody anything. If Nersa had lost the case, then we would have to refund them. [The outcome] is not really a victory for us or for Nersa; its significance is that it has provided clarity."
Phasiwe said now that the uncertainty was cleared up, Eskom would submit its tariff application for 2018-19 on Friday. Eskom has asked for an increase of 20% for the year, as the 8% increase granted during the last multiyear agreement had caused it hardship.
It also asked Nersa for permission to deviate from aspects of the tariff-determination methodology and some of the minimum information requirements. Among the things that the utility requested not to provide were a valuation of its regulatory asset base; information on primary energy costs such as coal volumes, coal-handling and water costs; and a range of financial information.
This included the provision of segmented cash flow statements; a 10-year sales forecast; and metrics on coal purchases and burn rate. Nersa declined most of the exemptions, but allowed for the valuation of regulatory assets to be done in the next multiyear application.
Phasiwe said Eskom would provide the data required for the application to be processed.