By Antonio Ruffini

1 March 2013 – The National Energy Regulator of South Africa (Nersa) has awarded Eskom an average 8% annual tariff increase over the next five years. The utility had asked for 16% a year over the multi-year price determination (MYPD3) period between 2013 and 2018, commencing at the start of April 2013.

Eskom’s requested increase was widely criticised by both business and labour organisations. Numerous submissions at public hearings held across South Africa earlier in 2013 stressed that Eskom’s requested tariff increase level would be at the expensive of the country’s economy.

Eskom’s requested tariff increase would have taken the price of electricity at the end of the 2013 to 2018 MYPD3 period up to R1.28/kWh, or a real price in today’s terms of R0.96/kWh. At an 8% rate, the granted rate will see the electricity price rise to just under 90c/kWh by 2018.

The large discrepancy between what Eskom requested to ensure it keeps the lights on and the tariff increase awarded by Nersa suggests that one or both of the organisations got their calculations wrong.

Nersa says that the 8% increase a year over the MYPD3 period will ensure Eskom remains efficient, effective and sustainable. Eskom says the regulator’s decision will present challenges in enabling it to keep the lights on.

One of the reductions was in Eskom’s request for funding to implement demand side management programmes to reduce the use of electricity. Demand side management is one of the most economical ways of dealing with electricity supply-demand constraints, and this budget was slashed from a requested R13 billion to R5 billion over the five years.