NERSA GIVES ESKOM A ‘ONE-OFF’ TARIFF HIKE
Eskom will be allowed to raise its power tariffs by 12.7% next year to bring in an extra R7.8 billion, the National Energy Regulator of SA (Nersa) announced on Friday.
Then, in 2016 and 2017, Eskom will have to revert to the 8% increases it is allowed to implement in terms of the current multiyear price determination (MYPD).
Nersa had approved the recovery of this money from the regulatory clearing account in July.
But it has only now made up its mind about how Eskom will be allowed to do it.
Nersa could have made Eskom apply fewer increases over a period of years, but decided on a “one-off” recovery for the cash-strapped power company.
Eskom had asked to recover far more – R18.4 billion in total.
However, Nersa trimmed that down by, among other things, not letting Eskom recover the cost of the massive unbudgeted quantities of diesel it is burning in peak power plants in the Western Cape practically around the clock.
Since the electricity crisis of 2008, Nersa sets the allowable tariff increases in these multiyear decisions.
The extra money Eskom gets to squeeze out of customers comes from revenue and expenditure forecasts being off the mark in MYPD2 between 2010 and 2013.
This third MYPD started last year and ends in 2018.
The process is meant to provide the power company with exactly the money Nersa believes it needs to carry out its job of building power stations and running the power grid.
Eskom had an annual revenue of R140 billion in its last financial year, equalling 62.8c kilowatt per hour of electricity sold.
Most consumers pay much more than that because bulk buyers get lower rates and households tend to get supplied through municipal middlemen who also make a profit.
This makes it unlikely that any given consumer will experience precisely the Nersaapproved increase.
Eskom had originally wanted Nersa’s blessing to increase power tariffs by 16% every year of the MYPD3 period, making the regulatory clearing account concession announced on Friday a very small drop in a large financial hole that principally relates to the building of the Medupi and Kusile power stations.
Earlier this month, the National Treasury agreed to help Eskom with new equity by “leveraging non-strategic government assets” and letting Eskom borrow more money.