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Nersa rejects Eskom’s 19.9% tariff increase‚ but grants 5.23%

Eskom has been granted a 5.23% electricity tarriff increase.
Eskom has been granted a 5.23% electricity tarriff increase.

The National Energy Regulator of South Africa (Nersa) on Friday approved a revenue application of R190.348bn for Eskom for the 2018/2019 financial year‚ which will result in an average percentage price increase of 5.23%.

Eskom had applied for a total allowable revenue of R219.514bn‚ which would have translated to a 19.9% average percentage increase.

Nersa chairman Jacob Modise said at a media briefing in Pretoria that Eskom had asked for an expenditure increase of R62.221bn‚ but only a 51.122bn increase was approved.

Nersa also refused to allow the R511m allowable revenue Eskom sought to derive from its demand management programme. Nor did it approve R193m for research and development‚ only allowing Eskom to recover R112m.

The Nersa revenue and tariff decisions will be implemented for the period 1 April 2018 to 31 March 2019 for non-municipal customers and from 1 July 2018 to 30 June 2019 for municipal customers.

Modise said the tariffs for the municipalities still needed to be worked out.

Modise said Eskom had asked Nersa to consider its application for only one year because the government's Integrated Resource Plan (IRP) had not been finalised.

The IRP is the country's future roadmap for electricity planning. Energy Minister David Mahlobo announced earlier this month that Cabinet had approved the IRP.

Modise said Eskom submitted its application in August and Nersa published its application on September 23 and invited public comment.

"Twenty-three thousand comments were received‚" Modise said.

Comments came from a variety of sources including heavy energy users‚ NGOs‚ environmental activists and local government bodies.

Nersa also held public hearings in eight provinces.

The previous five-year multiyear price determination period was applicable for the period April 1 2013 to March 31 2018 for the non-municipal customers and July 1 2013 to June 30 2018 for municipal customers.

A number of lobby groups‚ including the National Black Consumer Council and the Organisation Undoing Tax Abuse (Outa)‚ had opposed the tariff increase.

Outa made a submission to the regulator that Eskom should not receive any increase for next year‚ claiming that Eskom was not an efficient operator and was not legally entitled to additional cost recovery.

“A proper interpretation of the legal framework determining Eskom’s cost recovery and Nersa’s mandate shows that Eskom may only recover its costs and earn a return if it is ‘an efficient operator’‚” Outa said in its submissions.

“It is patently no longer an efficient operator and Nersa therefore‚ in law‚ has no option but to deny Eskom any additional cost recovery until the enabling legislation is amended or until Eskom returns to being ‘an efficient operator’.”

Outa said the lavish and excessive previous increases approved by Nersa allowed Eskom to‚ among other things‚ increase staff headcount by 50% without any increase in sales and fund overruns on more than R100bn overruns in three power station builds.

Eskom expressed disappointment that it did not get the double-digit increase it had expected.

"We will go through the reasons that the regulator will publish in due course so that we have an understanding how it reached its conclusions‚" Eskom spokesman Khulu Phasiwe said.

Phasiwe said the increase allowed by the regulator would affect Eskom's efforts to be on a stable financial footing.

But Phasiwe acknowledged that Eskom still had a lot of work to do to improve its efficiences.

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