Utility proposes massive tariff increases

Antoine e Slabbert

Eskom wants its clients to pay on average 19.9% more for electricity from April 1 next year and proposes that municipalities pay 27.3% more for bulk electricity purchases from July 1, 2018.

This comes against the background of controversy about an aborted irregular R30 million pension benefit for its former CEO Brian Molefe, after serving only about two years in the post.

The proposed increase was dis- closed in a confidential draft tariff application for 2018-19 that Eskom submitted for comment to National Treasury and local government association Salga. Moneyweb has seen the document.

Eskom is expected to incorporate the comments from National Treasury and Salga before submitting its application to energy regulator Nersa this week. Public consultations will be held before Nersa decides on the increase.

The regulator allowed Eskom an increase of just 2.2% in the current financial year which is, in real terms, a decrease. Nersa at the time invited Eskom to submit an application for a higher increase based on financial hardship, but Eskom preferred to proceed with its application for the next tariff period.

It did receive permission from Nersa to apply for a single year increase due to regulatory uncertainty around the Regulatory Clearing Account (RCA) mechanism that is currently the subject of a court appeal and pending the finalisation of the Integrated Resource Plan and Integrated Energy Plan.

The draft application is for total revenue of R218.7 billion, an increase of 6.6% from the current year. The price impact is, however, much greater because of the lower sales volumes.

The building blocks of the tariff allocation are operational cost, primary energy including the cost of buying energy from independent power producers, return on assets and depreciation. This is then divided by the forecast sales volumes to arrive at an average tariff.