Energy Regulator Rejects Eskom Tariff Hike Application

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Eskom-logoThe South Africa’s energy regulator has declined to award Eskom’s wish to increase tariffs arguing the utility corporation was not convincing enough in its presentation. The National Energy Regulator of South Africa (Nersa) says it rejected Eskom’s application for a 25.3% tariff hike for the 2015-16 financial year. The disappointed Eskom said it would study the decision and make further deliberation on the position of the regulator.

“The National Energy Regulator of South Africa (Nersa) has announced that it would not grant Eskom the 9.58% tariff increase it had requested in the selective reopener for the third multi-year price determination (MYPD 3) for the period 1 July 2015 to 31 March 2016,” the corporation said.

“We note the decision made by Nersa, and we will study the details of the determination and consult with the Shareholder before we can comment further on its impact,” added Acting Chief Executive of Eskom, Thava Govender.

According to the state owned company, the increase was to fund higher usage of open cycle gas turbines (OCGTs) and cover the cost of buying capacity from the short-term power purchase programme (STPPP) in order to limit the severity of load shedding and the impact on the economy.

The Democratic Alliance (DA), a leading opposition party in South Africa commented that Nersa demonstrated true independence by refusing to be ‘strong armed’ into exorbitant tariff increases that would have had disastrous consequences for our economy.

“This decision ought to be hailed as a victory for all electricity consumers, for our economy and for every unemployed South African,” the party said.

“It is unthinkable that Eskom expected an increase of that nature which would have been an external shock to our economy, resulting in a massive reduction in jobs, an unsustainable increase in input costs, and the unavoidable closure of many small and medium sized firms across South Africa.”

DA added that the move by Nersa paves the way for the long term reform of the energy sector in South Africa. “The Department of Energy and Eskom should now heed the DA’s advice and seek reform in terms of breaking the Eskom monopoly through increased competition within the sector, an increased focus on renewable energy and the rejection of expensive nuclear energy”.

It suggested that the time has come for Eskom to seek funding from the private sector through the sale of a 30% equity stake in Eskom, to be listed on the Johannesburg Stock Exchange (JSE).

Proceeds from the tariff increase were to fund power purchases from Independent Power Producers (IPPs).

“A public-private partnership of this nature will raise billions of rands, strengthen Eskom’s financial position, introduce skilled board members to the parastatal, and improve overall management of Eskom.”

South Africa like Botswana is besieged by perennial power cuts that came on the back of poor energy sector planning although Eskom and Botswana Power Corporation (BPC) were warned of the impending problems.

Botswana, which relies heavily on Eskom, is struggling to complete the Morupule B power plant while government has admitted that stability would only come in 2019.

“Load-shedding is robbing South Africans of their livelihood as investors lose confidence in the economy and the manufacturing industry is forced to cut jobs. The electricity crisis has already cost the economy billions and resulted in countless job-losses. Passing the problem on to consumers through above-inflation tariff increases adds insult to injury, and cannot be supported,” added the DA.

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