Eskom denies claims of Nersa application for performance bonuses

Contrary to what was reported in a Sunday newspaper, Eskom has denied making an application to Nersa for R1.8bn to pay performance bonuses.



Eskom made it quite clear in a media statement released on Tuesday 7 January, that it did not apply for R1.8 billion from the National Energy Regulator of South Africa (Nersa) in order to pay performance bonuses. 

“In keeping with a board decision, reflecting the poor performance of the business, no performance bonuses have been paid to employees in the past two years,” said the statement.

Eskom application did not include performance bonuses 

Contrary to what a Sunday newspaper reported, the statement explained that the MYPD4, otherwise known as the fourth multi-year price determination application, made by Eskom for the three-year period, did not include any allocation for performance bonuses. 

Eskom revealed that the application included a provision for an annual bonus for the three-year period, which is equivalent to a 13th cheque. This forms part of the Eskom basic conditions of service and cost to company (CTC) or employees’ normal remuneration package. 

However, non-union employees for whom a 13th cheque does not form part of their conditions of service, an option is given to structure their package to provide for a 13th cheque without increasing their overall compensation.

Nersa to disallow contractual costs

Eskom explained that Nersa, in its decision, incorrectly disallowed the contractual costs and hence they do not form part of the allowed revenue granted to Eskom. 

Separately, Eskom has lodged a court application to review Nersa’s MYPD4 decision to deduct the R69 billion that the government has provided to Eskom as shareholder support. 

The court application does not include any other aspects of the MYPD4 decision. Eskom said the case will be heard in court next week. 

Eskom takes Nersa to court for tariff increases 

In March 2019, power utility Eskom approached the courts in an effort to force Nersa to reconsider electricity tariffs for the next three financial years.

The move came after Nersa published the reasons for decisions for its MYPD4 revenue decision and the Regulatory Clearing Account (RCA) balance decision for the 2018 financial year. 

Nersa’s MYPD4 decision made on 7 March 2019 in terms of which tariff increases of 9.41%, 8.1% and 5.22% were allowed for the next three years, left Eskom with a shortfall of about R102 billion, compared to what was applied for.

Eskom said the key reason for this shortfall was Nersa’s decision to offset the envisaged government support or R23 billion per year against the return on assets.

“This resulted in the return on assets in the decision being approximately negative 1% for each of the financial years,” said the power utility.

“This is very far below a reasonable return and worsens Eskom’s financial sustainability. The Electricity Regulation Act requires Nersa to set revenues such that it would be reflective of prudent and efficient costs, including a reasonable return on capital,” it added.