Energy regulator Nersa has missed its personal “tight deadline” to finalise a new technique for figuring out the tariffs Eskom, municipalities, and all different electricity licensed suppliers could cost.
A gathering of the vitality regulator on Thursday (29 September) famous that it’ll solely be finalised early subsequent 12 months, because of delays within the appointment of technical specialists and drafters, based on Nhlanhla Gumede, full-time regulator member for electricity and chair of the Nersa electricity sub-committee.
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Gumede stated the preliminary June deadline was prolonged to 30 September, however that these appointments, amongst different issues, delayed the method.
This after Eskom needed to go to courtroom to stop untimely implementation of the proposed new methodology.
Valid methodology the one choice
The saga started final 12 months when Nersa rejected Eskom’s tariff utility for the 2022/23 – 2024/25 interval, on the idea that it was ready utilizing the 2016 methodology, which Nersa held had expired.
Eskom argued that the methodology stays legitimate till changed by one other lawfully developed and accepted methodology.
The courtroom dominated in Eskom’s favour and ordered Nersa to find out the tariffs for the primary of the three years by 25 February, following the prevailing (2016) methodology.
Eskom and Nersa later settled the remainder of the authorized dispute, and a courtroom order was made primarily based on their settlement that Nersa publish the appliance for 2023/24 for public remark by 1 August, and attain a call by 24 December, following the identical present methodology.
If, then …
Regarding the tariff willpower for 2024/25, the courtroom decided that “if Nersa publishes a new pricing determination methodology and reviews all other related regulatory requirement[s] for the industry by 30 September 2022, Eskom shall submit a revised 2024/25 revenue application by no later than 1 June 2023 to Nersa for consideration and approval by 20 December 2023”.
It was this September deadline that Nersa, and particularly Gumede, was chasing.
At a public workshop Nersa held in regards to the new methodology, Gumede had stated there isn’t any time to waste in finalising the new methodology as the present one is now not acceptable.
Since the courtroom order requires not solely the methodology itself to be finalised but additionally associated paperwork, it was all the time going to be a tall order. Eskom not too long ago listed not less than 9 paperwork that licensees are sure to that should be reviewed earlier than a new methodology could be applied.
These embody the South African Grid Code and the South African Distribution Code, the Minimum Information Requirements for Tariff Applications, the Eskom Retail Tariff and Structural Adjustment Methodology, and the Regulatory Reporting Manual.
Surprise determination
The electricity sub-committee in July took a shock determination to increase its public session on the following Eskom tariff determination to cowl each 2023/24 and 2024/25 in what Moneyweb thought-about to be a pre-emptive strike, ought to the new methodology not be prepared by the tip of September.
Gumede was the one committee member who opposed the choice.
This state of affairs has now performed out precisely like that and the tariffs for each the approaching monetary 12 months and the one thereafter might be decided based on the prevailing methodology.
Read: Nersa to seek the advice of on two years’ price of Eskom tariffs as a substitute of one
Why the push?
During the general public hearings in regards to the new methodology stakeholders have been essential of the push to finalise it.
The Minerals Council suggested Nersa to cease its “unwise” and rushed overhaul. Its know-how analyst Christian Teffo stated it isn’t prepared for implementation, and that it’s unfair to anticipate stakeholders to simply accept an incomplete methodology on the idea of ideas solely, with out figuring out what the affect might be.
It can be higher to enhance the present multi-year value willpower methodology (MYPDM) incrementally whereas the electricity provide business is in flux and till the present revision of the coverage and legislative framework has been accomplished, he stated.
Nersa stated in an announcement on 4 August that it plans a phased implementation of the methodology, however Eskom GM for regulation Hasha Tlhotlhalemaje questioned in the course of the listening to whether or not that is possible.
The three ideas underpinning the proposal are activity-based costing, type-of-use tariffs and marginal pricing, which based on Eskom are usually not regulatory ideas in any respect and are wholly inappropriate.
Read: ‘Wrongly placed’ concepts in Nersa plan will end in a lot greater tariffs: Eskom
The Energy Intensive User Group (EIUG) expressed its concern in regards to the affect the new methodology may have on energy customers, and identified that Nersa’s proposed elimination of the subsidies giant energy customers pay to melt tariffs for others could result in sharp will increase in family tariffs.