Nersa fast-tracks rate debate Eskom decision by end of week
THE National Energy Regulator of South Africa (Nersa) has said it will announce its decision on whether to grant Eskom its request for a 12.61 percent energy hike by the end of the week.
The trouble-prone power utility launched an urgent application for the tariff hike on Friday, citing its requirement of a R32.9 billion cost recovery for its open cycle gas turbines and R19.9bn for the short-term power purchase programme.
If the application is granted, it would increase the cost of electricity by 9.33c from the current 74c a kilowatt.
Nersa spokesman Charles Hlebela said the application would not be opened to the normal public participation process as it was a selective reopener for the third multiyear price determination that was approved last year.
But Hlebela said though the application would not go through the normal process, it did not mean that Eskom would be able to get the increase automatically.
“We are not really sure whether the energy regulator would accede to the Eskom application,” Hlebela said.
“So whatever decision needs to be made it has to be made soon and has to take into account all the existing factors.
“Our responsibility… is to ensure that the electricity network is not disrupted and that any review… is done in a way that would not affect consumers adversely,” he said.
Eskom has until Friday to table amendments to its pricing structure for the current financial year – in time for municipalities to filter the review into their plans when they finalise their budgets by the end of the month.
The latest application comes just a few weeks after Eskom imposed a 12.69 percent increase in April.
Eskom said its application was for 10.1 percent for the turbines and the short-term power purchases, as well as a 2.51 percent increase in the environmental levy by 2c per kilowatt-hour.
Speculation had been rife that Eskom would seek a 25.3 percent increase in July following the 12.6 percent hike that it implemented this month to direct customers and a 14.2 percent for municipalities. If granted, the hike will take Eskom’s tariff increases to 25.3 percent for this year alone.
Eskom’s spokesman Khulu Phasiwe said the application was made after the utility took into account its revenue requirements of R130bn until the end of the multi-year price determination, which would end next year, and the prevailing commodity prices.
“We are not speculating or hedging in our outlook,” Phasiwe said. “We are just basing our request on the reality of the current prices and the demand against the supply.”
Eskom’s application comes in the wake of continued strains on the electricity grid largely blamed on the unpredictable ageing infrastructure, a funding squeeze and delays in the commissioning of Medupi and Kusile. Power cuts, which are estimated to have cost the economy about R300bn since Eskom’s woes first surfaced in 2008, have become rampant this year.
The Energy Intensive User Group of Southern Africa (EIUG), which represents South Africa’s largest energy consumers such as mining companies and big manufacturers, yesterday described the application as ill-timed and regrettable, arguing that any increase would put pressure on input costs for companies and hamper economic growth.
Investment risk
“We are faced with a clear risk of international companies having to reconsider investing in South Africa,” EIUG spokesman Shaun Nel said.
Trade union federation Cosatu said it would call on its members to take to the streets to protest the application. Deputy general secretary Bheki Ntshalintshali said Nersa should delay making a decision until stakeholders had been consulted.
Dawie Roodt, the chief economist at Efficient Group, described the application as detrimental to the economy, charging that Eskom should first address its leadership woes before making requests for further electricity hikes.
Zingaphi Matanzima, the spokeswoman for the Chamber of Mines, said the industry had been struggling to curtail rising input costs for a long time and was wary of further costs.