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EEC UNDERSTATED E555M OVER-RECOVERY – ESERA

03/02/2023 07:07:00 Sabelo Majola

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EZULWINI – Could this be an oversight or simply administrative calculations that can be justified?

This question begs an answer as the Eswatini Energy Regulatory Authority (ESERA) has made claims that Eswatini Electricity Company (EEC) understated its regulatory clearing account (RCA) balance of E555 068 298 over-recovery. Accountingtools.com explains over-recovery as more than actually incurred in business. As part of its electricity tariff hike application, EEC submitted an RCA balance of E168 950 192 over-recovery for the regulatory period 2020/21 and E12 053 238 under-recovery for the period 2021/22 to be liquidated (net over-recovery of E156 896 954).

Analysis

After a thorough analysis of costs and based on the information available, ESERA approved an over-recovery balance of E358 374 362 for 2020/21 and over-recovery of E196 693 936 for 2021/22 resulting in a net RCA balance of E555 068 298 million over-recovery. The details of the RCA were unpacked by ESERA Tariff Analyst Nozipho Mthimkhulu during a meeting with the Editors Forum at Sibane Sami Hotel yesterday. Mthimkhulu explained that the regulator resolved that half the over-recovery, which was E277.53 million, be liquidated in the financial year 2023/24 and the other half be liquidated in 2024/25.

A question was posed to Mthimkhulu, seeking clarity whether EEC lied in its declaration of the over-recovery and she explained that it was not lies in the true sense of the word as this could have been informed by a lot of factors. She stated that the submitted amount supported the company’s figures as requested by the regulator and the latter comes in as auditors to verify the accuracy of the submitted information.

“For example, sometimes we deem some of the company’s expenses that they incur as unallowed costs. It is not because they did not incur that cost but because after carefully analysing it, against the directives that the operator received from us, we sometimes find that it was negligence from their part or because they were ineffective or whatever other reason,” she said. EEC Marketing and Corporate Communications Manager Khaya Mavuso said a number of engagements were held with the regulator relating to the tariff application, among which were the adjustments made on the EEC submission of reconciliations for the two years.

Adjustments

He mentioned that on submission of all relevant information relating to the tariff, the regulator analysed the submitted information and made necessary adjustments, as they deem fit, to costs and other input provided. He also revealed that this did not translate to deliberate omissions or any act of corruption on the part of the applicant. According to Mavuso, not all costs that the EEC submits for the reconciliations were automatic pass through costs, as the regulator made the determination.

“EEC had provided the regulator with explanations and justifications for its tariff application. During the tariff pronouncement on Wednesday, ESERA pledged to provide a detail of the tariff award, which we believe will also provide EEC’s perspective of the application,” he stated. On the contrary, EEC extended its appreciation to ESERA for the final assessment of the tariff application, which had resulted in the announcement of the applicable tariff for the years 2023/24 and 2024/25.

Mavuso highlighted that having received the ESERA award on Wednesday February 1, EEC was yet to unpack and further engage the regulator on its contents and issues of concern. He said this would then lead to the publication of the tariff schedule to be effected as of April 1, 2023, according to the requirement of the tariff methodology. “EEC will further unpack the award and engage with ESERA on matters of concern. It is worth mentioning that all what we did during the tariff application was according to best practice. During the tariff application, EEC presented all supporting evidence towards the tariff application,” he said.

Award

When unpacking the tariff award to EEC, Mthimkhulu stated that the tariff analysis resulted to an average increase of 10.14 per cent in 2023/24 and an average increase of 8.02 per cent in 2024/25. She explained that the implementation of these average tariff increases would see energy charges for domestic customers, small commercial customers, and industrial customers increase by 10.98 per cent, 10.90 per cent, and 10.80 per cent respectively.
“The regulator notes that the migration towards cost reflectivity had to take place over an eight-year period from 2021/22 financial year. However, considering the impact of the extent of the average tariff increases, inputs received from electricity customers during consultations, prevailing economic conditions, hence decided to limit the domestic energy tariff increase to 0.08 percentage points above small commercial tariff increase,” she said.