Pretoria - Business Unity South Africa (BUSA) has welcomed the decision to grant Eskom a reduced tariff increase of 16%, down from the original 25.9% approved in the Multi-Year Price Determination (MYPD 2).
The National Energy Regulator of South Africa (Nersa) on Friday approved the reduced tariff, which is for the period 1 April 2012 to 31 March 2013.
"The announcement comes at a time when BUSA had become increasingly concerned about the impact of increasing electricity prices on the cost of doing businesses in South Africa.
"It also comes at a welcome time to assist in reducing the overall impact of administered prices on the inflation basket, and the knock-on effect on interest rates," said the body on Friday.
Public Enterprises Minister Malusi Gigaba said the lower tariff was a result of combined efforts by government and Eskom to reduce the impact of higher electricity tariffs on the consumer as well as the economy without compromising the utility's ability to keep the lights on and ensuring its long-term financial sustainability.
Earlier this month, the regulator received Eskom's application for a review of its tariffs.
"The reductions will have immediate benefits for businesses and households, and followed a request from President Zuma that Eskom investigate ways to reduce price increases over the next few years, in support of economic growth and job creation. The initiative by government regarding its allowed return on assets represents a huge investment in the economy," said Gigaba.
Eskom said the reduction has been enabled by concession by government as the parastatal's shareholder regarding its allowed return on assets, and by improvements in Eskom's financial position that have enabled it to save on capital expenditure.
Government had agreed to defer the shareholder return due to it in the 2012/13 financial year.
Gigaba said it was important to ensure that Eskom can manage financially and operationally with the reduced revenue.
"Before the revised submission was made, we asked if Eskom would be able to maintain its power stations, build new ones up to the completion of Kusile and keep the lights on while also maintaining its financial ratios and its standing with international rating agencies. The answer to that is yes," explained Gigaba.
"This is due to a much healthier financial and operational position, largely as a result of MYPD2 tariff increases."
Gigaba called on business as well as local authorities to pass on to consumers reductions they received as a result of the lessened tariff, adding that Eskom would propose a longer period than the standard three years for the MYPD3 that comes into effect in April 2013.
Details for this are still to be finalised and are subject to public consultation and regulatory approval.
"This should enable Eskom to ask for lower price increases than had been envisaged, in return for price certainty over a longer period," said the minister.
South Africa continues to have electricity prices that are among the lowest in the world.
Gigaba said it was important to ensure that Eskom can manage financially and operationally with the reduced revenue, adding that South Africans would have to reduce their electricity consumption.
"We must all collaborate to reduce demand wherever possible, and make it a habit to use electricity wisely and efficiently."
The reduced tariff would not compromise the utility's viability nor would it affect its ability to complete building of new power stations on time.
"The decision to propose lower tariffs this year is recognition that there have been significant changes in the economic landscape and in our own operating environment since 2009, when we applied for the MYPD2 increases," explained Eskom chief executive Brian Dames.
