The National Energy Regulator of SA (Nersa) made known its decision to grant an 8% increase on Eskom’s request for a 16% tariff increase today.
“The decision of the energy regulator is based on facts,” said Nersa chairperson Cecilia Khuzwayo.
“The third multi-year price determination will be 8% over the next five years.”
“The average electricity price will increase to 65.51 cents per kWh in 2013/14 up to 89.13 cents in 2018,” said Cecilia Khuzwayo, chairperson of Nersa, on Thursday.
Eskom had applied for a 16% increase in electricity prices in each of the next five years. This was more than double the current price, taking it from 61 cents per kWh in 2012/13, to 128 cents per kWh in 2017/18.
The decision comes on the heels of the current MYPD 2’s coming to an end in March 2013.
Last October, Eskom asked the regulator for a total 16% tariff increase over the next five years. The utility is asking the regulator for 13% for each of the five years for its own needs, plus 3% to support the introduction of Independent Power Producers (IPPs) which are expected to contribute 2% to the country’s energy grid.
At a Gauteng public hearing held last month, the power utility’s chief executive officer Brian Dames said that a stable supply of energy is crucial to power South Africa’s economic growth going into the future. Public hearings into the request were held nationwide.
Dames said that the request covered the cost of supplying power, investing in the future and financing new capacity.
Dames said Eskom was cognisant of the impact of its request, but that current electricity prices did not cover the full costs of producing electricity. The poor have also been considered under Eskom’s application, he said.
The tariff increase was necessary to maintain revenue as well as to cover operating costs and the financial stability of Eskom. The tariff Eskom was asking for, said Dames, should meet the requirements of both industry and consumers.
The proposed increase represented a total price increase from the current 61 cents per kilowatt hour in 2012/13 to 128 cents per kilowatt hour in 2017/18.
In November, Public Enterprises Minister Malusi Gigaba said the tariff increase was a necessity.
Gigaba said at the time although the power parastatal wished it could have kept its request to a single-digit figure, the double-digit tariff hike request was necessitated by the tough conditions prevailing in the economy.
Welcoming the news, Kevin Hustler, CEO of the Nelson Mandela Bay Business Chamber said; “The Nelson Mandela Bay Business Chamber is grateful that the National Energy Regulator of South Africa (NERSA) has taken cognisance of the combined voice of business, labour and civil society stating clearly in unison that the tariffs proposed by Eskom were unacceptable. The proposed tariffs were uncompetitive and unsustainable for our country as a whole, and they would have stifled economic growth and development into the future. We thank the commissioners at NERSA for listening and interacting with presenters at the regional hearings, and for being prepared to take into account suggestions and proposed solutions put forward for consideration.
“This outcome demonstrates the value of the collective voice of business, as the Business Chamber represents its members. The Chamber played a strong and steadfast role in presenting its position through the appropriate NERSA processes, and has been heard on all hearing platforms granted through the public hearing process. The Nelson Mandela Bay Business Chamber is proud of the efforts of its Strategic Resources Task Team, under the leadership of Mr Angus Clark, and supported by Mr David Mertens, MD of Autocast, as well as their respective teams that have supported and built the business case for our rejection of Eskom’s proposed five year tariff increase.”
IFP Spokesman on Public Enterprises, Mario GR Oriani-Ambrosini, MP said this about the increase; “For years I have denounced the entire process of financing Eskom’s build program through tariff increases is a fraud on us all. NERSA was established to determine tariff increases on the basis of changed operational costs and market conditions, not to finance capital cost and expansion. It is not equipped to do so and forge alternatives to the build program. It is bound to go with the flow of events created by Eskom. It is good that on this occasion it resisted Eskom’s outrageous requests, but this is part of a charade in which in all likelihood Eskom already discounted in its request the possibility that Nersa would half it.
“Eskom will undoubtedly lament this decision merely to make it more credible. The reality is that tariff increases are indirect regressive taxes which are killing our ecumenic growth and family savings alike, impoverishing the whole of our society. The build program should have been financed either with an international tender which would have attracted needed foreign investments or through the State budget so that its costs could be more equitably distributed and absorbed over a longer period.”