South African electricity tariffs are likely to increase by more than the 8% already sanctioned for the year starting April 1, 2015, after the energy regulator determined on Wednesday that Eskom had under recovered R7.82-billion in revenue between 2010 and 2013.

The National Energy Regulator of South Africa (Nersa) made its long-awaited determination relating to Eskom’s Regulatory Clearing Account (RCA) application for the second multiyear price determination period (MYPD2) covering the three-year time horizon from April 1, 2010, to March 31, 2013.

The RCA is a “depository” for qualifying variances between approved revenue and expenditure during a control period, and allows the utility to claw back, or repay, against such variances.

Eskom made its RCA application on August 29, 2013, applying for a cumulative RCA balance of R18.4-billion.

It was not immediately clear what the tariff impact would be in percentage terms, but the regulator said in a statement that the adjustment would be implemented in the 2015/16 financial year.

It also indicated that it would be issuing reasons for the decision in due course. It is also understood that at the meeting of the energy regulator it was suggested that an implementation plan be developed in light of the RCA ruling.

Nomura’s Peter Attard Montalto said in a note that tariffs could rise by between 2 percentage points and 5 percentage points on top of the existing 8% tariff increase already approved for next year.

Assuming a 5 percentage point additional increase, or 13%, Attard Montalto calculated it would add an additional 0.2 percentage points to headline consumer price inflation from the July print next year.

Eskom, which welcomed the determination, said it would only comment in detail once it had received reasons for the decision and said it could not say what the tariff impact was likely to be for 2015/16.

In noted that Nersa had not decided on the liquidation of the RCA balance. "Eskom cannot determine what the impact will be on specific customer categories as the regulator will still decide on how this balance will be liquidated."

Nersa said the pass-through adjustments consisted of coal price and volume adjustments, revenue variances, a variance on the open cycle gas turbines (OCGT) primary fuel prices and volumes, as well as the capital expenditure clearing account variance.

“Variances in the OCGT fuel cost attributable to changes in the unit price of primary fuel are allowed as automatic pass-through, limited to the volumes allowed by the Energy Regulator.  However, variances attributable to changes in the utilisation of the OCGT plant (volume variances) are subject to a Nersa prudency review,” the regulator said.

Eskom, which is operating under the MYPD3 tariff framework, through which Nersa granted the utility five yearly increases of around 8% for the period beginning April 1, 2013, through to March 31, 2018, is expected to follow up with RCA applications for the current control period.

In fact, interim CEO Collin Matjila said Eskom looked forward to "continue working with Nersa on further RCA submissions in accordance with the revised MYPD methodology, as published during December 2012".

"What is positive at this stage is that a robust process was followed in conducting the RCA process, which is an illustration of the application of the regulatory mechanism that supports the implementation of the Electricity Regulation Act,” Matjila added.