Nersa grants Eskom 9.4% tariff hike from 1 April

Pretoria – National energy regulator Nersa has given two main reasons for granting Eskom a 9.4% tariff increase for the 2016/17 financial year.

The hike will kick on 1 April.

In terms of sales, Eskom applied for a “regulatory clearing account” (RCA) balance of R11.723bn. The energy regulator allowed R6.175bn. The larger part of this difference is because Eskom did not disaggregate the special pricing agreements and international sales when allocating the approved third Multi-Year Price Determination (MYPD3) revenues to different customer categories, said Nersa.

With regards to other primary energy, the energy regulator has disallowed coal handling and start-up gas and oil. Furthermore, nuclear has been re-phased over the life of the nuclear plant.

With regard to open cycle turbines (OCTG), Eskom applied to recover R8.024bn. The energy regulator has allowed Eskom to recover R1.252bn. The energy regulator has found that Eskom used the OCGTs due to the unavailability of the plant. In this regard, the energy regulator has allowed the excess production from OCGTs at a rate equivalent to the coal price instead of the actual cost of operating the OCGTs.

Read also: Eskom’s Molefe – Borrowed Money will be repaid with New & Revised tariffs

Eskom submitted an application to Nersa in November last year to recover R22.8bn, which the utility said it used to avert load shedding.

The decision comes after extensive consultation with government, unions, small and intensive users, who engaged in public hearings in six provinces, according to Nersa chairperson Jacob Modise.

Modise said the challenge has been and still is regulating the energy industry in a manner that balances the interests of energy producers on the one hand and consumers on the other.

Nersa evaluated the RCA balance for the first year (2013/14 period) of the MYPD3 amounting to R22.8bn. – Fin24

Source: http://www.fin24.com/Economy/Eskom/why-nersa-granted-eskom-94-tariff-hike-20160301

OUTA media statement

OUTA will request the full written reasons for NERSA’s decision to approve a 9.4% tariff increase, over and above the previous year’s 12.69% increase, for Eskom for the 2016/2017 year. The organisation believes this increase is too lenient towards Eskom and allows the bill for various inefficiencies within Eskom to be passed onto consumers. The decision will be studied in detail and energy analysts, economists and lawyers will be consulted to determine whether the increase is justifiable and lawful.

“We are of the opinion that an inflexible approach whereby NERSA unconditionally grant an average of 8% or more every year until 2018 is unlawful. The cumulative effect of these price increases will raise the cost of living disproportionately and bring the South African economy to its knees, which is clearly not in the public interest” says Ivan Herselman, Director of Legal Affairs at OUTA.

In addition to the request for written reasons, OUTA will be embarking on an in depth study of Eskom’s dealings that have resulted in enormous electricity price increases of over 700% (some estimate 1000%) in the last decade, starting with a request – through the Promotion of Access to Information Act (PAIA) – for information relating to coal contracts, diesel contracts, property valuations, delays on Medupi and Kusile power stations, power station performances and various other matters relating to procurement.

“The process will be started within the next weeks. We will soon make an announcement on how the public can get involved in our quest to find the information, analyse the information and take appropriate action in order to curb the unaffordable rising costs of electricity” Herselman stated.

OUTA remain of the opinion that it is unjust for the public to be required to foot the bill for the inefficiencies within Eskom, and that this bill should rather be footed by the Department of Energy, the sole shareholder of Eskom.

Although passing the bill to the Department of Energy would ultimately result in the public paying for the inefficiencies, as the public also funds the Department of Energy, the accountability for operating inefficiently is not merely passed onto consumers directly through one cost. The government will sooner rather than later be forced to take the policy, legislative and accountability measures required to stop Eskom’s leaking bucket.