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SA’s electricity regulator being pressurised to keep electricity hikes low

6 August 2012 – The Energy Regulator of South Africa (Nersa) told South Africa’s parliamentary portfolio committee on energy that with Eskom proposing a 14% electricity price hike this year a number of important factors would weigh heavily when determining the actual price increase.

Nersa’s Thembani Bukula says in the past few years electricity price increases in South Africa have been steep. The price increases were influenced by capital cost requirements for the construction of new power stations (Medupi, Kusile, Ingula) that had previously not been factored into the country’s electricity prices, while coal prices have also increased over the past few years. “We must get into price increases that are inflation related,” Bukula says.

According to the Independent Online, it is believed that Eskom will be seeking an annual increase of between 14.5% to nearly 20% over the next five years. Once the Eskom application is made public hearings will take place in January 2013, with a decision on the increase at the end of February. This increase would apply from April 2013.

However, David Ross, DA’s deputy energy spokesman, argues that Eskom’s infrastructure costs should not be placed on the shoulders of electricity consumers. “In the last three years there have been increases of a total of 68%,” he said. “We must do everything we can to ensure that consumers do not end up paying for Eskom’s capital expenditure programme.” He suggests that a suitable business model would be for consumers to pay for consumption and, possibly, for the interest on loans which fund the expansion. Eskom is spending R385 billion over the medium term on expansion, including R209 billion on the Medupi and Kusile power stations. Ross argues that Eskom’s capital costs should be financed entirely by the issuance of Eskom bonds internationally. In addition, consumers should not have to pay today for capital projects which would be used by tomorrow’s consumers.

Bukula responds that the days of consumers footing the bill for infrastructure expansion are drawing to a close. “We are over the hill… and going downwards and the ultimate goal is to have inflation-linked increases.”