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Pretoria - The National Electricity Regulator of SA (Nersa) said it granted Eskom the tariff increase that was needed, not just what the power utility wanted.
Thembani Bukula, the Nersa regulator member responsible for electricity, said the tariff increase of about 25% per year for the next three years was deemed sufficient in the light of the expected efficiencies Nersa recommended.
Those efficiencies are with regards to Eskom's coal procurement contracts, the cost of which concerned Nersa last year and which it subsequently investigated.
"Eskom told us what they wanted, we gave them what they needed," said Bukula. "We made recommendations to Eskom to utilise at maximum capacity those mines where it had lower-priced coal contracts."
A unit of electricity will now cost 41.57c/kWh for the year ending March 2011, 52.30c/kWh for the following year and 65.85c/kWh for the one after that.
Nersa also said the revaluation of Eskom's assets, mainly its power stations, will be phased in over the next five years. This will "allow for the smoothing of prices while allowing Eskom adequate revenues and cash flows needed for the capital expansion programme", said Nersa in a statement.
In making the decision, Nersa said it considered all inputs it received and made an attempt to balance the conflicting needs of the public, industry and Eskom itself. It also conducted a detailed analysis of Eskom's applications and tested them. The impact of the proposed increase on the poor was also considered, said Nersa.
"We have all had to accept that Eskom must increase its tariffs. We are not arguing about that," said Bukula. The country also needs to accept that Eskom has to build power stations, for which money is needed.
Bukula said Nersa's view with the current tariff increases was that it would help Eskom dig itself out of the financial troubles it is in at the moment. "But like any other business, it may find itself in need of funds from time to time," said Bukula.
There may be one more tariff increase at around 20% in 2014, thereafter inflation-related increases would be sufficient, according to Nersa.
- Fin24.com