Energy Minister notes Nersa decision

Friday, March 1, 2013

Pretoria - Energy Minister Dipuo Peters has noted the National Energy Regulator of SA’s (Nersa)’s decision to grant Eskom an 8% tariff increase annually over a period of five years while also welcoming the differentiated increase that will cushion the poor.

“In particular, Peters welcomes the differentiated increase that cushions the poor and vulnerable sections of society, limiting the increase for those using less than 350 units per month at 5.6%, which is below the inflation rate,”  said Thandiwe Maimane spokesperson for the minister  in a statement on Thursday.

The much-anticipated decision to grant the power parastatal an 8% tariff increase over the course of the next five years of the Multi-Year Price Determination period 2013/14 to 2017/18 (MYPD3) was made public at a media briefing.

The increase, said the regulator, which is tasked with determining tariffs for Eskom, on the homelight 20A customers consuming up to 350 kWh per month will be limited to CPI of 5.6%, while the increase on homelight 20A customers consuming more than 350kWh per month will be 7.6%

The average electricity price will increase to 65.51 cents per kWh in 2013/14 up to 89.13 cents in 2018. The current MYPD2 comes to an end at the end of March 2013. The first and the second determinations had been over a three-year period.

In its application to Nersa in October 2012 for a tariff hike, Eskom asked the regulator to grant it a total 16% hike over the course of a five-year period. The total 16% would be split, with 13% going to the parastatal’s own needs and 3% to support the introduction of Independent Power Producers (IPPs).

Peters was encouraged by the important role played by all stakeholders ranging from individuals to organised formations who participated in the public hearings conducted by the regulator across all nine provinces.

“Peters proudly notes the diligence with which the Nersa determination was reached, and that the process re-affirms the independence of this very important regulator,” said Maimane.

Chief Executive Officer of the South African Chamber of Commerce and Industry (Sacci) Neren Rau said the regulator had taken the right decision given the current economic circumstances.

“Sacci believes that in the current economic circumstances the right decision has been made as the capacity of businesses to absorb costs has diminished,” he said.

The chamber consulted its members on the matter and indicated that an increase in the range of 5-10% was in the interest of sustainable electricity supply.

Sacci found that at a 10% increase in the tariff, the economic consequence was 0.25% increase in inflation per annum over the next five years, a 1.62% cumulative decrease in GDP and a 2.8% decrease in employment over the same period. At 8%, these impacts will be moderated.

“Electricity pricing is also a key indicator of competitiveness and a factor in Foreign Direct Investment decisions. A lower tariff is therefore beneficial to both,” he said. –