Registered users can save articles to their personal articles list. Login here or sign up here

Electricity tariff increase of 17% looming

State power utility submits application to Nersa.

Eskom has just announced that it has submitted a tariff application to National Energy Regulator (Nersa). Economist Mike Schüssler says it may lead to an increase of 17% in electricity tariffs next year.

It may ask for even more in the following year, but that submission will only be made at a later stage.

In a departure from previous practices, Eskom has announced the submission of its latest application publicly. The utility said it has applied to Nersa “for the evaluation and approval of the regulatory clearing account (RCA) balance for the first year (2013/14 period) of the third multi-year price determination (MYPD3) amounting to R22.8 billion.”

This means Eskom has asked Nersa to reimburse it for the financial shortfall in the first year of its current tariff period (MYPD3), namely 20013/14.

In terms of the prescribed methodology used to determine electricity tariffs Nersa may adjust tariffs after the end of every financial year with regard to the over- or under-recovery of Eskom’s costs from the tariffs. If there is a over-recovery the adjustment may be in favour of the consumer, but under-recoveries may trigger an adjustment in favour of Eskom. This mechanism is called the Regulatory Clearing Account (RCA).

Eskom is therefore saying it under-recovered costs by R22.8 billion in 2013/14 and is asking Nersa to compensate it by adding the amount to future tariffs.

If approved, the R22.8 billion will translate into a tariff increase of about 14%, says Schüssler. This increase will be over and above the 3.5% increase granted to Eskom in terms of earlier Nersa decisions.

Initially Nersa determined that electricity tariffs would increase by 8% per year in every year of MYPD3, which stretches from April 1 2013 to March 31 2018. On April 1 2015 however, tariffs increased by 12.69% instead of 8%, after an adjustment was made for under-recovery in the previous tariff period (MYPD2).

This increased the base amount for the next year, with the result that the expected 8% increase next year decreased in percentage terms (in comparison with the current year) to 3.5%.

The increase applied for now will be in addition to the 3.5%, which indicates a possible increase of more than 17%.

Eskom did earlier submit a similar application, but withdrew it in favour of an application to re-open certain aspects of the current tariff determination. If approved, this application would have seen consumers pay 25% more for electricity. Nersa however rejected it, saying the methodology did not provide for a “selective re-opener”.

In the recent past a pattern has developed of Nersa approving significantly lower increases than what Eskom applied for.

In terms of the methodology Eskom is entitled to recover prudently incurred costs and a reasonable return. The prudency requirement has often been a hurdle for Eskom.

Eskom could also now have applied for an adjustment with regard to 2014/15, but has not done so. It is not clear whether the coming municipal elections played a role in the decision to defer that application.

It is possible that Eskom may submit an application for further adjustments for 2014/15 and 2016/17 after year-end on March 31 next year, together with a submission for the next tariff period (MYPD4).

This may result in an even bigger increase sought in the following year (2017/18).

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   13

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

by the time Eskom is done with South Africa, there’ll be nothing left. The little that remains of industry will be dead.

The water level rises slowly, how many had their swimming lessons?

Time for this gang of turkeys to look inward at cost cutting. I have just come from their huge office block in East London. There is a Bell jet ranger parked on the lawn, must be a VVIP visiting. EL has an airport and roads but clearly this person is VV important. I think that if you got rid of half the people in that building it would still function. I saw people in cubicles with nothing on the desks, others chatting sociably over the cube walls. Others just arriving for work, 10.30 am absolutely useless lot. Even the gate guards are arrogant.
Wait till the tariff blackmailing starts, we want this or black outs coming.

Anyone want to take a friendly bet that Nersa will cave-in to Eskom’s tariff increase demand? Now we’ll see how really independent they are.

“Extortion (also called shakedown, outwrestling, and exaction) is a criminal offense of obtaining money, property, or services from a person, entity, individual or institution, through coercion. …. in its formal definition, means the infliction of something such as pain and suffering or making somebody endure something unpleasant.
In United States federal law, extortion can be committed with or without the use of force and with or without the use of a weapon.” – Wikipedia

In South Africa it is called Eskom and it is perpetrated by Luthuli House.

Exactly, a month before the hearings will come the threats from these thugs.

You can’t print money and throw it down a hole in perpetuity. What every government institution needs is to employ a staff of mothers and housewives. You know those people who can stretch a rand for as long they need to, and who have any eye for identifying unnecessary expenses, those people! Employ a bunch of those and listen to every word they say! I get the distinct impression no one in the public sector has a concept of what a budget is! #publicsectormustfall

…” Fees must Fall”…remember? And, govt “gave-in” !
…when do we also start an “Electricity rates must fall” campaign? We wont, cause we just keep on paying….keep on complaining…justifying…subsidizing….
Sadly, I am virtually at the stage of capitulation! We readers will never leave our jobs for a day or so, and take to the streets with sticks and stones and burn and break! No, we complain and do nothing except talk talk talk…because it makes us feel a little better!
They keep on squeezing – we just keep on paying! When are we gonna pop?
Two Answers – 1.go off the grid, if you can afford to! or 2. pay up!

We don’t live in a normal country. We live in a country with a SEP attitude. (Someone else’s problem) Why did they take to the streets burning and looting? because the powers that be did not listen. It is like asking your gardener where he was yesterday. Why was he not at work, and he develops this F you attitude looks over your shoulder and wonders if you are talking to him. the same here. In a normal country you would be able to sit down around a table and debate the issue. Not so here, our immediate response would be not to pay, they would hopefully ask why. Not here they will switch you off. As you said only way is to go off grid. what happens then? they will tax you for your system, just like they charge farmers rates and taxes but water, garbage, sewage and electricity the farmers supplies himself at great cost. You can demonstrate as much and as violently as possible but you will get no response. Why? Because you were supposedly previously advantaged.

I stay on a farm and get electricity from Eskom . Their fees before my electricity usage is brought in to the picture is R2000.00 per month.When tariffs go up their fees go up to . Many of us are planning to go off the grid.

Don’t know why you are all getting upset!! It’s nearing Xmas and the executive at Escum need bigger bonuses. After all, the sole reason why all the cadres were appointed to the Escum’s board was to feed at the cash trough.
Sadly, we now have one of the highest tariffs in the world. Well done ANC.

can’t understand why anyone is surprised. its been talked about for ages. every time I see one of these “can’t believe it” stories the country takes another small step to a totalitarian government – which must be coming closer and closer. not sure whether EFF is a Trotskyist movement – but will be finding out pretty soon I guess

Load All 13 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2