The South African energy regulator has agreed to a tariff increase of 9.4% for 2016/17 only.

The National Energy Regulator of South Africa (Nersa) has approved a portion of Eskom’s demand for the much-debated electricity tariff increase.

Nersa chairperson, Jacob Modise, delivered the announcement at a briefing yesterday following almost two months of a national public hearing over the state-owned power utility’s plea for a 16.6% tariff hike needed to recoup ZAR22.8 billion ($2 billion).

The approved increase amounts to ZAR11.241 million, almost half of the utility’s demand for ZAR22.8 billion ($2 billion).

Direct Eskom consumers can expect to see this increase come into effect as of 1 April 2016 and municipal consumers can gear up to expect a higher bill from July 2016.

Eskom Group Chief Executive, Brian Molefe said after the announcement had been made: “Eskom has noted NERSA’s decision, which yet again doesn’t address the question of Eskom’s continued financial sustainability. In addition, it will have operational consequences.”

“We note NERSA’s decision and will study the details contained in the reason for decision document once received before commenting on its implication,” Molefe said.

He added: “We understand the implementation of the regulatory rules in NERSA’s RCA balance decision. The decision on the revenue variance and certain primary energy costs including independent power producers is supported.”

Approved tariff concern

[quote]South African non-profit organisation, OUTA, stressed in a company statement that they “remain of the opinion that it is unjust for the public to be required to foot the bill for the inefficiencies within Eskom, and that this bill should rather be footed by the Department of Energy, the sole shareholder of Eskom.”

OUTA will request the full written reasons for the regulator’s decision to approve a 9.4% tariff increase, over and above the previous year’s 12.69% increase, for Eskom for the 2016/2017 year.

The organisation added in a statement that it believes this increase is too lenient towards Eskom and allows the bill for various inefficiencies within Eskom to be passed onto consumers. The decision will be studied in detail and energy analysts, economists and lawyers will be consulted to determine whether the increase is justifiable and lawful.

“We are of the opinion that an inflexible approach whereby NERSA unconditionally grant an average of 8% or more every year until 2018 is unlawful. The cumulative effect of these price increases will raise the cost of living disproportionately and bring the South African economy to its knees, which is clearly not in the public interest,” Ivan Herselman, Director of Legal Affairs at OUTA commented.

Could this escalate further load shedding?

Building on his remarks over the approval, Molefe added: “We note with concern the decision on open cycle gas turbines (OCGTs), which will guide Eskom’s operations in the future in terms of balancing the energy supply and demand in a bid to avoid load shedding.

“We have reduced diesel usage in recent months and have made great strides in our maintenance plan, however we continue to run a constrained grid. OCGTs are part of our emergency portfolio and have been used in the past to avoid or limit load shedding with the understanding that we can recover these costs within the RCA process.

He added: “The recovery of diesel costs is now seriously in question with NERSA’s current decision. We will do our best to minimise the risk of load shedding, striking a balance with Eskom’s already depleted balance sheet.”