Energy Regulator Makes Costly Error

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This story is kind of crazy and you have to wonder was this done on purpose or are certain individuals being paid a back hander to make these errors. Nothing is ever just black and white when so much money is involved. Let me talk you through what happened and then you decide for yourselves if this is even feasible and could this be just a genuine mistake.

The National Energy Regulator Of South Africa also known as NERSA has one job and that is to protect the consumers from the SOE called Eskom. Eskom supplies the electricity to all the homes and businesses and every year they put forward their proposed increases and NERSA then fights on the public's behalf. The increases proposed are upwards of 20% and are as much as 30% and they often end up with an increases somewhere between 10 and 15%.

To give you an idea this year the electricity tariffs were approved at a 12.74% increase rate with the next two years having an additional 5.36% and 6.19% top up. This is a 24.29% increase over a 3 year period except there was a huge error on the part of NERSA that is worth R54 billion which is over $3 billion dollars so you can get an idea of this is not a small sum of money.

The problem is they knew about this back in July if we look at the agenda of a meeting they had and the date is clearly visible. An electricity pricing expert who obviously is too smart to work for NERSA predicts that this is going to cost an extra 25.74% and not 18% so roughly 13% extra for the next two years. On top of this Eskom ask for other annual increases so these figures are off the charts when it comes to being realistic.

The error was traced back to the data for depreciating assets and regulatory asset inputs. This was red flagged back in January of this year for reassessment and this just never happened. Now with us sitting in September it is too late and this money is going to be funded by higher electricity tariffs. The 5.36% and 6.19% were the accepted increases for next year and the year after so they need to be adjusted and both these figures will now be between 9% and 11% so basically double the original percentages. This looks to be more likely to be around 13% each year so the next 3 years would have seen a nearly 40% increase in total.

The employee who has taken the wrap for this has been suspended, but how is that acceptable as the entire NERSA should be shut down as they have failed the entire country. We know when electricity rises in costs then so does all of manufacturing so this is going to be responsible for even more inflation.

When you put these figures into context Eskom's revenue for 2024/25 is expected to be at R300 billion besides the normal agreed increase of 12.74% so they are going to be making an extra 18% over and above this due to the error. NERSA has publicly said "sorry", but the point is they should be looking at ways to rectify the mistake because this is going to be forgotten very quickly.

ESKOM obviously knew the "mistake" and kept quiet as this is extra funds they can steal at the publics expense. Blackrock is an investor with ESKOM and you tell me they did not spot this and it tells me there were some back hand deals happening and this was done on purpose. I cannot believe this was just a calculation error and a genuine mistake as it is too big a figure to not spot something is wrong. R147 million per day is serious money that now has to be funded by increased tariffs and us the consumer has to pay the bill.

The good news is I am on solar for the majority of my electricity and this is looking like a smarter move each day that passes. I initially though I would pay my system off in equivalent electricity payments through savings within 54-60 months and now I would definitely say less than 48 months. Every year that passes the tariffs rise and more people will see what I am experiencing and move away from the grid. Eskom's greed is forcing people away and the short term gains they are making with new profits will vanish within the next 5 years.

Posted Using INLEO