The error related to calculations around the accounting value of Eskom’s generation assets.
The National Energy Regulator of South Africa (Nersa) has explained the origins of an error that may cost consumers billions in the years to come.
An error in Nersa’s multi-year price determination revenue decision resulted in a R54 billion settlement with Eskom and outraged electricity users.
The regulator was before the portfolio committee on electricity and energy on Wednesday, where the nature of the error and potential remedial action were discussed.
The error related to calculations around the accounting value of Eskom’s generation assets, but was isolated to generation, not transmission or distribution.
The error effectively shortchanged Eskom by billions, as what it was granted by Nersa was not what it had initially applied for.
On realising the shortfall, Eskom claimed entitlement to R107 billion and sought to set aside the revenue decision, but an agreement between the parties resulted in halving that amount.
Error found in January
In addressing the portfolio committee, Nersa confirmed the errors were in the second and third years of the multi-year determination.
The error occurred during the process in which teams were assigned dedicated workstreams, which took place after Eskom submitted its application but before the public participation process began.
Nersa revealed that the errors were detected as early as January 2025, but that later confirmation of rectification of the calculations was untrue.
“Based on the technical team’s assurance that the figures that appeared on the document, including generation regulatory asset bases, had been revised, the energy regulator proceeded to take the decision and pronounced on it,” Nersa executive Nomfundo Maseti explained to the committee.
Eskom initially proposed a settlement of R62 billion, but an amount of R54 billion was accepted based on “customer affordability and Eskom’s financial sustainability”.
“The error is regrettable. It should not have happened. Additional quality assurance steps have been implemented.
“Further reviews by selected advisory forums will be implemented [and] the employees responsible for the errors will be held accountable,” Maseti concluded.
‘Did not arise from incompetence’
In a letter to the DA’s shadow minister for mineral resources and energy, Kevin Mileham, dated 4 September, Nersa accepted that it made a “clerical error”.
“This omission did not arise from incompetence but was the result of a version control issue,” wrote Nersa chairperson Thembani Bukula.
“This figure does not constitute an additional allowance but, rather, represents the amount that ought to have been awarded originally,” Bukula explained.
Mileham dismissed the explanation, saying Nersa’s response had to go beyond lip service.
“Consequence management is not a suggestion; it is an absolute necessity,” stated Mileham
“It is simply unacceptable that ordinary consumers are forced to pay for the ineptitude of state officials who continue to draw a salary,” he added.
Bukula’s letter explained that Eskom disputed the methodology applied to transfers from work under construction to commercial operation.
“In the first year of the financial year of the Generation business, the correct roll-forward methodology was applied.
“In the next two years, the balances were not properly rolled forward, as actual annual balances were used instead of the cumulative additions from the previous years’ closing balances,” stated the chairperson.
The R54 billion settlement will be spread out over three years.
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