electricity

Electricity to Cost More for Consumers

Electricity Tariff Hike Approved

A 9.4% electricity tariff hike  was approved by the National Energy Regulator (Nersa) for 2016/17. This after Eskom applied to recoup R22.8 billion in 2015, which it claims to have used to prevent load shedding.

Chairperson Jacob Modise says Nersa made its decision to approve the electricity tariff hike after thorough consultation with heavy and light users, unions and the government. Public hearings took place in six provinces.

“The public interest was also considered as well as input of stakeholders,” Modise said.

 

Eskom Only to Get Half

An evaluation of the “regulatory clearing account” (RCA) in the first year (2013/14) of the third Multi-Year Price Determination (MYPD3) showed a balance of R22.8 billion.

Due to reduced sales, Nersa only approved half of what Eskom asked for. Accordingly, Eskom only got R6.2 billion, instead of the R11.7 billion it had asked for.

“Nersa also only allowed a small part of what Eskom claimed for diesel, i.e. R1.3bn compared with the R8bn Eskom claimed for diesel,” said Modise.

The electricity tariff hike will take effect as of April 1.

 

Nersa’s Decisions

In view of the information at hand and an evaluation of Eskom’s application for the initial year of the third Multi-Year Price Determination (2013/14), Nersa decided that, for the 2016/17 financial year:

  • the R11.2 billion RCA balance is recoverable from local Special Pricing Agreements, standard tariff and international customers.
  • 256 billion is recoverable from standard tariff customers.
  • The average tariff is to be hiked by 9.4% for standard tariff customers.
  • R983 million is recoverable from Eskom’s international and local SPA customers.
  • Within three months, Eskom is to submit a new MYPD application, taking revised expectations and predictions into account that are consistent with current conditions.

 

Finance Minister Comments

Last Wednesday, at the press briefing prior to his 2016 Budget Speech, Finance Minister Pravin Gordhan said any electricity tariff hike is only to be approved if essential, and not simply for the sake of comfort.

“Regarding tariff increases, are they necessary or just comfortable in a particular environment?” Gordhan proposed. “We need to improve governance, financial management and state-owned entities’ contribution to the developmental agenda.”

Moreover, the Treasury said “further efficiency improvements are necessary at Eskom to ensure moderation in future tariff increases”.

“SOEs are not sacrosanct… We are willing to take a tougher look at them.” Gordhan said.

These comments were made one day prior to Nersa’s scheduled announcement on whether or not it would approve Eskom’s electricity tariff hike request. However, this announcement was postponed to Tuesday.