Nersa may not fight Eskom hike

Johannesburg - Opponents to Eskom's application to hike power prices by 35% per annum for three years shouldn't expect energy regulator Nersa to force the power utility to find alternative income sources.

That is, if Nersa's recent record on tariffs is anything to go by. After Eskom applied for a 34% tariff increase for 2009, Nersa granted it 31.3%, saying electricity prices had to rise substantially.

"Up to now Nersa has only had to fine-tune tariff increase requests from Eskom," said Econometrix economist Tony Twine. "It has not forced anybody to change any of their objectives, or to change the means with which to achieve those objectives."

According to Twine, the role of a regulator is not to ensure a company is well capitalised, as that should be the shareholders role - government, in Eskom's case. Twine said if Nersa doesn't give Eskom the increase it wants, Nersa could force government to recapitalise the company,

"By not giving Eskom all that it says it needs, Nersa can force the government to not sit and do nothing [about Eskom's recapitalisation]."

However, Twine said Nersa has the difficult task of balancing conflicting demands from three quarters: Eskom, proper electricity supply and the public's economic imperatives.

"Whatever Nersa does, it's not always going to be convenient or desirable for all three," said Twine, adding that the regulator "can't wave a magic wand" to produce solutions that will satisfy these conflicting demands.

Chaired by Collin Matjila, Nersa is made up of eight regulators. They are a mixture of engineers with a long association with the electricity industry, and lawyers with limited industry experience. The regulators are appointed by the minister of energy and have fixed contracts.

- Fin24.com