How your power costs may change

Cape Town - Energy Minister Dipuo Peters has implored South Africa's municipalities to keep electricity increases in line with the National Energy Regulator's (Nersa's) guidelines, and not to pass on the full increase to domestic consumers.

"The domestic sector should not experience an increase above 15%," said Peters who was commenting on Nersa's decision on Wednesday to grant Eskom a 24.8% tariff increase for 2010, followed by a 25.8% increase in 2011, and a further 25.9% increase in 2012. The increases will be effective as from April 1 this year and apply to non-municipal electricity users.

Municipalities have always passed on the full Nersa increase to consumers, regardless of the fact that municipal tariffs are already higher than the wholesale tariff. Peters asked for municipalities to act differently this time.

Nersa's approval for Eskom to hike its electricity price came with guidelines that effectively cap municipal electricity tariff increases to 15% in 2010/11.

The regulator specified that municipalities that implemented the 34% (above the Nersa agreed increase of 31.3%) increase in the 2009/10 financial year should only increase tariffs by 15.33% in July this year.

This, according to the Nersa guideline, would be followed by a 16.03% increase in July 1 2011, and another 16.16 % in July 2012.

Municipalities wanting to implement a different increase have to apply by April 2010 to Nersa which will consider each case separately.

Low income users helped

As part of Wednesday's tariff annoucement, Nersa also provided details of a "residential inclining block rate tariff structure". This is aimed at making larger electricity users cross-subsidise the low-income domestic user.

In effect, this means a 10.59% reduction in the new tariff, to 54.7c/kWh (kiloWatt per hour), for households consuming less than 50 kWhs a month, and a reduction in the tariff increase to 5.2% to 58.48c/kWh for those consuming between 51 kWhs and 350 kWhs a month.

Homes that use between 351 kWhs and 600 kWhs every month will face immediate increases of 21.95% and homes using more than 601 kWhs a month will pay a tariff increases of 35.82% this year followed by increases of 25.8% and 25.9% in the following two years.

Positives and negatives

Peters said that while steep increases in electricity tariffs aren't desirable, the positives of the increases outweigh the negative aspects. Without energy security, the levels of economic activity necessary to create new jobs could not be achieved, she said.

However, Eskom has yet to say how it will fund the shortfall between the tariff increase it asked for (35%) and the one it was given.

The increase Nersa granted will allow a revenue stream of R85bn for 2010/11, R109bn for 2011/12 and R141bn for 2012/13.

This is significantly lower than the R98bn revenue Eskom was requesting for 2010/11 and the R132bn and R180bn it was hoping for in the following two years.

- Fin24.com