War rages over Eskom prices

BIG HIKE PLANNED: CONSUMERS READY FOR COURT

Energy regulator Nersa says it’s ‘considering several scenarios’ to hike Eskom tariffs on April 1.

Court challenges have limited an Eskom hike to 2% this year, but that won’t be enough to keep it running. Now the regulator has to make a decision.

Energy regulator Nersa says it’s “considering several scenarios” to hike Eskom tariffs on April 1 to ensure the utility’s financial health, but big consumers are preparing for a court battle.

The High Energy Users Group says it is ready to challenge in court any increase above 2.2%.

Should Eskom indeed be granted only a 2.2% tariff increase, it is expected to apply for an increase in excess of 20% in 2018.

Nersa said the 2.2% increase in terms of the multi-year price determination (MYPD3) would be too low to ensure Eskom’s sustainability.

It is “currently considering several scenarios that will ensure the sustainability of Eskom within the confines of the law”.

It would take into account the Electricity Regulation Act (ERA) and the Electricity Pricing Policy, Nersa said.

Informed sources say Nersa might grant Eskom an inflation-based increase because the ERA imposes on it an obligation to ensure Eskom’s financial sustainability.

Such an increase could at a later stage be adjusted after the appeal and any further RCA applications. Eskom has submitted two further RCA applications totalling R44 billion. These are on hold.

Eskom is only entitled to an average 2.2% tariff increase in terms of the MYPD3 granted in 2013. Although an annual increase of 8% was granted until March 31, 2018, it changed as a result of interim increases Nersa granted Eskom in terms of the Regulatory Clearing Account (RCA) methodology.

Nersa also confirmed further RCA increases have been put on hold pending Nersa and Eskom’s appeals against a high court judgment last year, setting aside the RCA increase that was implemented on April 1, 2016.

But David Mertens, spokesperson for the High Energy Users, members of the Nelson Mandela Bay Business Chamber, ever-higher tariffs undermine Eskom’s business plan. “Higher tariffs make Eskom less sustainable as it results in decreased sales,” he says.

Mertens says limiting the Eskom tariff increase to 2.2% last year was a major victory and the chamber would not look away if Nersa again deviates from the prescribed methodology.

He says the ERA also requires approved tariffs to reflect costs incurred by an efficient supplier. “I cannot see how they will achieve that.”

The court also ordered Nersa to consult Eskom’s customers before deviation. Nersa has not done that so far and time is running out.

Nersa says Eskom is required to present its tariffs on March 15 to Cabinet. If not, it will need an exemption from the Minister of Finance.

Any exemption will have to be completed before municipalities table their budgets with local electricity prices by the end of March.