CEO presents its case to recover costs at NERSA - Eskom

Phakamani Hadebe says application only covers costs that were incurred efficiently and prudently

Eskom presents its case to recover costs at the NERSA Public Hearings  

16 April 2018

Today at the public hearings of the National Energy Regulator of South Africa (NERSA) 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. 

Phakamani Hadebe, Eskom’s Interim Group Chief Executive explained the importance of this process, “Our sustainability as Eskom 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. It is also worth noting that we based our application on the decision already taken by NERSA on our 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.”

Hadebe further emphasized that Eskom’s application only covers costs that were incurred efficiently and prudently as allowed by the regulatory clearing account (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 investors and is focusing on operational and financial stability and clearing governance issues by bringing all those engaged in fraud and corruption to account.

Internal processes have resulted in disciplinary hearings, suspensions and resignations of implicated executives. Continued focus and effort will be placed in combating corruption and pursuing justice within the legal framework. We also welcome various investigative interventions that are underway to get to the bottom of recent acts of fraud and corruption and we are in a process of claiming back monies owing to Eskom, including money that was fraudulently paid to McKinsey and Trillian.”

Calib Cassim, Acting Chief Financial Officer said, “Eskom is not expecting a once-off adjustment, but rather a phasing-in of the liquidation over a few years to make it fair and manageable for electricity consumers. We need to emphasize that this is a retrospective process where we apply to recover costs that have already been incurred by Eskom, but cover what the Regulator deems efficient and prudent and also cover sales volume variances.”

Eskom has made the application in terms of the RCA balance for the second, third and fourth year (2014/15; 2015/16 and 2016/17 period) of the third multi-year price determination (MYPD3).     

Issued by Eskom Media Desk, 16 April 2018