Eskom granted 31.3 percent tariff hike

Thursday, June 25, 2009

Pretoria - The National Energy Regulator of South Africa (Nersa) has granted power utility Eskom a 31.3 percent interim tariff hike.

"A 31.3 percent price increase on the average standard tariff is approved from 1 July 2009 to 31 March 2010," announced the regulator's Chairman, Collin Matjila, on Thursday.

This will result in an increase of the average standard tariff from 25.24 c/kWh to 33.14c/kWh.

This after the power utility submitted its request for an interim 34 percent hike from the regulator to cover its operational expenditure.

Nersa said the increase will result in estimated tariff revenues of R62.031 billion while the estimated total revenues including Special Pricing Agreements (SPA's) will be R64.70 billion.

This increase also includes a 2cents/KwH levy on the sale of electricity generated from non-renewable sources.

However, the increase includes a limited price increase of 15 percent to both the parastatal and municipalities' poor customers.

"The approved price increase on the average standard tariffs includes a limited price increase of 15 percent to both Eskom and municipalities' poor customers (i.e. Homelight 1 & 2 tariffs).

"It must be noted that this is an interim measure until the implementation of inclining block rate tariffs for protection of the poor," Nersa said.

Major industrial consumers who have special pricing agreements with Eskom will also not be affected by the hike.

The utility is regulated on a three year multi-year price determination (MYPD) which started on 1 April 2006 to 31 March 2009. The second MYPD (2) should have been in effect from 1 April 2009 to 31 March 2012.

The utility said that it had submitted its application late because it had yet to finalise its funding model for the capital expansion programme.

According to the rules of the regulator, it takes between three to six months before a decision is made over tariff applications.

Eskom is expected to submit the MYPD2 by the end of September, said Mr Matjila.

"There is no shift in the way we make decisions, the rules still apply. We are expecting Eskom to submit it before the end of September this year," said Mr Matjila, adding that a decision had to be taken quickly because of the nature of the application.

"This doesn't mean we sacrificed quality," he explained, adding that the regulator continues to engage Eskom on its cost drivers.

He added that Nersa was not in the position to state how much the increment will translate to because the MYPD 2 was still to be finalised.

"We are not able to give a projection now; we will be able to do that after the MYPD2 [is submitted]. The price of electricity is going to increase," he said.