Nersa proposes a 6.84% increase

THE NATIONAL Energy Regulator of South Africa (Nersa) has proposed a 6.84 percent increase for municipalities as they prepare to submit their applications.

Nersa said municipalities applying for an increase higher than the guideline should justify their increase to Nersa. The regulator said an approval would be based on, among others, a detailed plan on the additional funds requested.

It said approved funds should be ring-fenced to ensure that the extra funds were strictly utilised for the identified projects. “Municipalities must report to Nersa on a six-month basis on how the additional funds are utilised,” Nersa said. “Funds not utilised for the purpose for which they were approved will be clawed back in the following year.” In December Nersa approved Eskom’s allowable revenue of R190.34 billion for the 2018/19 financial year against the utility’s request for R219.514bn.

A number of South Africa’s municipalities buy electricity in bulk from Eskom and are licensed to distribute electricity to their customers. While Eskom’s electricity tariff increase kicks in on April 1, municipalities hike theirs on July 1.

It said it made a number of assumptions in deciding the percentage guideline for 2018/19, including a 7.32 percent increase in bulk purchases by municipalities from Eskom, a Consumer Price Index (CPI) of 5.1 percent, salary increases of CPI plus 1 percent and a CPI increase of repairs and maintenance, capital charges and other costs.

It said the guideline percentage increase did not amount to an automatic increase for municipalities and private distributors. “As a result, Nersa allows licencees to submit their proposed price adjustments or tariff increases annually for approval by the energy regulator,” Nersa said.

Nersa has invited public comments on the municipal tariff guideline increase. According to its schedule, Nersa is currently in consultation with key stakeholders such as National Treasury, Association of Municipal Electricity Utilities and the South African Local Government Association. Stakeholders have until March 20 to make their comments. Nersa said it would make its decision on the matter on April 18.

The Organisation Undoing Tax Abuse (Outa) yesterday said that it would make a submission to Nersa on the proposed increase. Outa chairperson Wayne Duvenage said that the organisation was concerned about the municipalities’ efficiency and ability to contain costs.

Duvenage said maladministration and corruption were at the centre of the inability of some municipalities to pay their debts to Eskom.