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OUTA speaks out on NERSA decision

Commenting on the National Energy Regulator of South Africa’s (NERSA) decision around Eskom’s request for tariff hikes, the Organisation Undoing Tax Abuse (OUTA) believes that Eskom has received “more than it deserves”.

OUTA noted that this is also a decision which reflects the lack of a coherent strategy by government on Eskom’s future and the pricing path, as NERSA apparently didn’t consider the effect of the R23 billion-a-year bailout over the next three years.

NERSA has approved Eskom’s request for tariff hikes to 9.41%, 8.10% and 5.22% price increases for years 2019/20 to 2021/22 respectively. Read more about NERSA’s decision here.

“We need government to work in an integrated manner, we need a holistic direction from either the Presidency or the Department of Energy. Government is talking restructuring of Eskom but if it was serious about this it should have interacted with NERSA, without compromising the independence of NERSA, which should have allowed the prices for the two outer years to be reassessed in the light of the effects of the restructuring,” says Ronald Chauke, OUTA’s portfolio manager on energy.

The organisation stated that government could have given NERSA an indication of what that bailout will be spent on and details of the restructuring, so NERSA could consider this in the pricing application.

Eskom tariff increase

Eskom had requested NERSA for increases of 15% a year, then upped this to 17% for 2019/20. Read more: Regulator gives reasons for approving Eskom’s RCA

“It’s a steep increase, 14% is huge. It’s going to hit customers hard and the issue of failure to pay electricity bills will be exacerbated,” Chauke noted.

The organisation had objected to the tariff hikes, submitting objections to the regulator during the public participation process.

On the other hand, OUTA has welcomed NERSA’s decision to review Eskom’s costs, efficiency and performance, its undertaking to independently value Eskom’s Regulatory Asset Base (RAB), to conduct performance audits on the power stations.

NERSA said it is considering investigating Eskom’s governance failures and adjusting prices accordingly based on this or the outcome of investigations by other authorities.

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