Disappointed Eskom eyes Nersa's reasoning for low tariff hike | Fin24
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Disappointed Eskom eyes Nersa's reasoning for low tariff hike

Dec 18 2017 12:50
Jan Cronje

Cape Town - Eskom said on Monday it is "disappointed" with national energy regulator Nersa's decision to grant it a tariff increase of 5.2% for 2018/19. Eskom was asking for a 19.9% hike in electricity tariffs.

Eskom said in a statement on the JSE news service that it made its application in accordance with the multi-year price determination methodology, which allows it to submit any changes permitted by the methodology.

Eskom had applied for an approved allowable revenue of R219.514bn for 2018/19.

After conducting a series of countrywide hearings, Nersa on Friday granted Eskom an average 5.23% tariff increase, which is closely aligned with SA's consumer price index.

This translated into a total allowable revenue of R190.348bn.

"Eskom will await the regulator’s reasons for decision document for the 2018/19 allowed revenue in terms of the ... methodology. This will provide insight into how this allowed revenue decision was made.

"The reasons for decision document will enable Eskom to make an assessment on the impact to the business and then make a decision on the way forward," it said. 

Widespread opposition

Nersa received more than 23 000 submissions on the subject, with widespread opposition against the proposed hike. 

The decision was welcomed by a number of groups which had argued a 20% increase was too high. 

The SA Chamber of Mines said that while it welcomed the lower than expected increase, "electricity costs continue to be the fastest growing component of the mining sector’s cost base, having increased by more than 300% over the past eight years".

The South African Federation of Trade Unions (Saftu), meanwhile, said that while it welcomes the reduction, it is  still slightly above inflation. 

The National Union of Metalworkers (Numsa) said it is dismayed that any increase was granted at all.

"By doing so, the energy regulator is demonstrating it does not act in the interests of the working class majority and the public in general. Most companies big and small simply cannot afford it," it said. 

Eskom had been hoping for an increase larger than just 5.2%, in part due to its constrained liquidity levels and difficulty accessing other funding.

In late November, after its credit ratings were downgraded, Eskom's acting CEO Sean Maritz in a statement had argued that with "the cooperation of the relevant participants" its funding plan could still be executed, "albeit under challenging conditions". 

It appears the power utility will now have to discover new sources of funding.

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