Eskom goes ahead with tariff hike

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eskom plant (2)Eskom, the South African power utility said the price increase to be implemented on 1 April 2015 to its direct customers is still 12.69% and for municipalities is set at 14.25% as from 1 July 2015. These tariff increases, according to the company, are as they were approved by the National Energy Regulator of South Africa (Nersa) in November 2014.

The troubled company revealed that its current financial position, as a result of historical non-cost reflective tariffs and the lag in recovery of eligible expenditure, does not afford the balance sheet the ability to pre-fund ‘further costs that are necessitated by a constrained power system such as short term power purchases from independent power producers and municipal generators and the increased use of open cycle gas turbines.’

“These constraints have necessitated Eskom to explore options for further review of tariff increases for the 2015/16 financial year. Submissions in terms of the Multi-Year Price Determination (MYPD) methodology have been made to Nersa in this regard,” it added.

Eskom said it has initiated a selective reopener of the MYPD 3 application from the 2015/16 financial year onwards that proposes an adjustment in the tariffs.

“This is due to costs incurred securing further short term power purchases and increased use of open cycle gas turbines,” it stated.

“In terms of the Municipal Finance Management Act (MFMA), Eskom is required to first consult with the National Treasury and the South African Local Government Association (SALGA) prior to submitting to Nersa for consideration. Eskom will consider these comments before submitting to Nersa. Nersa will then follow their normal governance processes before making a decision.”

“Further, the announcement by the Minister of Finance in the Budget Speech of the proposed increase in the environmental levy is yet to be promulgated. This will have an impact on the required tariff and as such Eskom will need an adjustment in terms of the tariffs due to the levy.”

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