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Tariff increase for Eskom attracts mixed response to Nersa's decision to only grant a 5.23% tariff hike instead of the 19.9% increase requested by the utility.

Nersa approved R190.348bn ($14.564bn) allowable revenue for Eskom, meaning an average increase of 5.23% and taking the average price of electricity from 89.13c/kWh to 93.79c/kWh. Eskom had asked for R219.514bn ($16.788bn) in revenue, which would have meant a 19.9% price increase taking it to an average of 106.87c/kWh.

This equates to the average price remaining under R1 per kWh.

However, according to Ben Theron, CEO of the Organisation Undoing Tax Abuse (OUTA), the lower increase is not to be celebrated. “This is a bittersweet victory for civil society. It’s much better than Eskom’s requested 19.9%, but we believe it should have got 0%,” said Theron.

The current pricing decision is forward looking (for an increase to Eskom customers from April 2018) and does not include Eskom’s regulatory clearing account applications for the last three years, which Nersa is still to consider.

This could mean further increases. It also does not include the municipal increase to their customers, as this process will now follow.

Tariff increase reaction

“Eskom notes and is disappointed with the decision by the National Energy Regulator of South Africa on Eskom’s allowed revenue of R190.348 billion for the 2018/19 financial year,” said the power utility following the regulator’s announcement on Friday.

The power utility had asked Nersa for a 19.9% average increase in electricity tariffs for 2018/19 that will result in total allowable revenue of R219.5 billion.

The regulator made the announcement at a media briefing at the regulator’s offices in Tshwane on Friday, 15 December.

Request followed methodology

Eskom said it made its application in accordance with the Multi-Year Price Determination (MYPD) methodology, which allows Eskom to submit any changes permitted by the methodology.

This corresponded to a revised average standard price increase of 18.9%.

“Eskom will await the regulator’s reasons for decision document for the 2018/19 allowed revenue in terms of the MYPD methodology. This will provide insight into how this allowed revenue decision was made.

“The reasons for decision document will enable Eskom to make an assessment on the impact to the business and then make a decision on the way forward,” said the state-owned power utility.

Stakeholder impact

Nersa said it had followed due regulatory processes in considering Eskom’s revenue application for 2018/19.

On 13 September 2017, Eskom’s application was published on Nersa’s website, along with an invitation to stakeholders to submit written comments.

A total of 23,000 written comments were received from stakeholders, consisting of comments from private individuals, small users, intensive energy users, non-governmental organisations and environmental activists, as well as local government and other stakeholders.

“AfriForum opposed this tariff increase from the very beginning by delivering written commentary to Nersa. We also participated in the public participation process by delivering a presentation which argues that the costs of Eskom’s alleged corrupt activities and maladministration must be excluded from the calculation of the increase for the coming year’s electricity tariff,” says Morné Mostert, AfriForum’s Head of Local Government Affairs.

OUTA had opposed the Eskom application, filing a lengthy written submission then later making presentation to Nersa, demanding a 0% electricity tariff increase.