Nersa explains 9.4% Eskom power hike

THE NATIONAL Energy Regulator of SA (Nersa) has sent Eskom back to the drawing board to revise the first year of its Multi-Year Price Determination (MYPD), to what will be more reflective of reality.

“We are trying to avoid a process of what should have been.

“We are saying let’s talk about what we have in a more accurate way,” Nersa’s head of electricity regulation, Thembani Bukula, told the National Assembly energy committee yesterday.

Nersa appeared before the committee to explain how it arrived at its decision to grant the power utility an average 9.4 percent increase in the price of electricity for 2016/17.

This would amount to revenue of R11.2 billion – half of what Eskom said it needed. Eskom will brief the National Assembly public enterprises committee on the progress of its turnaround strategy today.

Bukula said Nersa would repeatedly have to consider increases above Eskom’s original estimates if actuals were not aligned with projections and forecasts. “We need to get a price path that is stable and that enables customers to plan. We want to get a situation that’s a reality, not an optimistic focus,” said Bukula.

Eskom has three months to submit a new application that takes into account current circumstances. Eskom largely based its 16 percent increase request on lower than expected revenue from consumers and the use of gas turbines. But Nersa said if Medupi power station had come on stream in 2013 as predicted, it would not have been necessary to use gas turbines.

Bukala said any increase over 10 percent was worthy of re-looking at the MYPD. MPs said this year’s tariff hike was unaffordable for the general public. The poor and unemployed would again bear the brunt of Eskom’s poor planning. “The cash-strapped consumer is paying for Eskom’s inefficiencies,” said the IFP’s Jan Esterhuizen.

Nersa will have to approve the tariff increases for municipalities before the end of March, when councils are expected to table their 2016/17 budgets. Price increases for Eskom’s bulk consumers come into effect on April 1, while ordinary consumers will have to start paying more from July 1.

The DA’s Pieter van Dalen said if Eskom was better at managing its cost overruns and getting Medupi and Kusile power stations operational, consumers would not have to pay such a hefty price.

Gordon McKay, also of the DA, said it appeared that Eskom was “ignoring” the price determinations.

“The Regulatory Clearing Account (RCA) is supposed to give consumers peace of mind, but Eskom is making a farce out of the process by not getting its estimates right,” he said.

Deputy Minister of Energy Thembisile Majola said it was to be understood that, given Eskom’s history, there would be tensions between it and its regulator, Nersa.

“In the past, government acted on advice from Eskom. I don’t think we’ve got over that yet,” she said. “You can’t be the player, referee and the judge.”