Eskom lowers tariff application

Proposes phasing in of further R66bn RCAs.
Eskom interim CFO Calib Cassim making closing remarks at energy regulator Nersa's public hearing in Midrand. Picture: Moneyweb

Power giant Eskom has lowered its tariff application for 2018/19 from an average 19.9% for its direct customers to 18.9% and 27.5% to 26.9% for municipalities.

The utility announced adjustments at the closing of energy regulator Nersa’s public hearings about the application.

Nersa is expected to announce its decision on December 7. The new tariffs will take effect on April 1 for Eskom’s direct customers and July 1 for municipalities and their customers.

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Eskom interim CFO Calib Cassim said Eskom’s revenue requirement has dropped by R6.6 billion to R212.8 billion after it excluded costs to be paid to some Independent Power Producers (IPPs) for renewable energy. The original application included some projects that would not be ready to sell electricity to Eskom during 2018/19 and these are the ones that have now been removed.

This led to a reduction of R7 billion in the revenue requirement.

Eskom then added R450 million to its primary energy cost to replace the volume of energy those renewables would have supplied with coal generation.

The net effect is a revenue reduction of R6.6 billion.

Eskom’s sales forecast has also been revised downward based on more recent sales figures. It has revised its expected sales volumes to standard customers downward from 192 953GWh to 188 082GWh.

The net effect is that, according to Eskom’s calculations, standard customers should pay 18.9% more and not 19.9%.

In response to arguments from various stakeholders, including the Energy Intensive User Group of Southern Africa (EIUG), Eskom has proposed how Nersa should deal with the outstanding three Regulatory Clearing Account (RCA) applications.

The RCA is a mechanism that allows Eskom to claw back higher than expected costs or lower than expected revenue under certain conditions.

Eskom has lodged such applications for year 2, 3 and 4 of the previous five-year tariff period (MYPD3), which ends in February next year. They total R66 billion with R45 billion of that relating to lower than expected revenue.

Eskom indicated that the RCA of MYPD year 5 is also expected to be around R20 billion.

Nersa is yet to assess these applications, but Business Unity SA (Busa) and the EIUG have urged Eskom to waive them.

Eskom rejected this call, saying that it would be a contravention of the Electricity Regulation Act and tariff methodology that determine Eskom must be allowed to recover efficient cost and earn a fair return.

Eskom nevertheless acknowledged that the RCAs will have a severe impact on the affordability of electricity tariffs.

It therefore suggests that the RCA applications be processed together with the MYPD4 application. That is the application for the period starting on April 1 2019 and is expected to cover three financial years.

Eskom proposes that the RCAs be liquidated in a phased manner from April 1 2019. It gives the following example:

Eskom’s proposal entails small percentage increases in every year of MYPD4, over and above the MYPD4 award itself, to recover the RCA award. At the end of MYPD4 there would not be any further increases based on these RCA applications, but the higher base remains until the full RCA award has been recovered.

Cassim told Nersa that this would address the affordability concern while enabling Eskom to utilise the award in its financing activities even before receiving the cash from consumers. It would also assist auditors when they assess Eskom’s revenue generation in the context of its going concern status, Cassim said.

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I’ve just replaced my burst electric geyser with a gas one. The insurance company allowed it. So I’m now looking forward to a reduction in my bill Eskom 🙂 One day I’ll be totally off the grid.

I have to disappoint you, the energy content of the gas is much lower for the same price than electricity. A few years ago I worked out that it would cost about twice as much to heat water with gas than with electricity. I know the electricity prices went up since then but so did the price of bottled gas.

Dear Hun- You have no idea what you talking about. I have replaced both my geysers with gas. One about 5 years ago. I pay 45% less for gas today and on average about R150 per month(sometimes less) which works out about R5 per day for gas. Electricity has increased by gazillion % and if power is down I have hot water.This energy content thing is just a BS argument. Gas is much more effective than electricity for cooking and heating water and convenient during power breaks. It is more work to change the gas cylinders but I can live with that.

Looked it up for you, 1kg of gas is equivalent of 7kWh. The bottled gas price in SA is a bit over R22/kg according to Google, it means that 1kWh energy from gas costs over R3. Add to this the problem of either having to buy an extra bottle for spare or try to get a refill at the most awkward time, the cost and inconvenience is simply not worth it. I heard people also complained about partially filled bottles.

Dear The Hun.

I am the distributor for LPG boilers in SA.Can you please tell me what it cost to run a 4 kw element (200 lt ) geyser for 30 days average family of 4 people with 2 bathrooms and one kitchen with laundry room .I live in Alberton the cost of electricity from Ekuruleni is R1.75 p/kwh.

I installed my boiler 5 years ago and have never switched it on since then.

Its ok let them be granted these crazy increases. The labour force should not be blamed when the ask for double digit wage increases. I think we should brace ourselves for 30% wage increases. that’s only fair.

Sorry ,i have not put my electric geyser on for 5 years .

Solar heating does not come with a 26.9% increase in one year, and it will heat your water for 99% of the days in year.

To Lulualert and gasfreak
I am sorry if you failed maths and science, I am an engineer, although retired but my math is still pretty good. To heat water irrespective of the source of heat, woodfire, gas or electricity, the same amount of energy is required for the same amount of temperature increase. Using open fire there is obviously lot of heat loss, but with electrical boilers the loss is similar or even less than a gas boilers. The energy required to heat one litre of water by one degree Celsius is one kilocalorie. One kWh is the equivalent of 860 kcal, the same if you use bottled gas or electricity. Look up the prices and do the calculations. Gas cooking is not cheaper, the advantage of it is the quick reaction of the burner. Using inductive stove for cooking has the same advantage. The disadvantage of gas cooking is that it is very hard to simmer because even on the lowest setting there is a danger of burning the food (one can use a metal plate under the pot to spread the heat) and the oven part has very bad temperature regulation. I grew up in Hungary and in every city there was and still is piped gas which people use for cooking and heating. The price of gas is about half for the same energy output than electricity, but despite this lot of people are changing to electric stoves, mainly because of the disadvantages I mentioned. Central heating and boilers still use gas.

18.9% Increase is RIDICULOUS! (Nearly 20% increase)

No country can survive such expensive electricity prices.
Companies will close down, people will lose their jobs.

All because of one person => “President” Zuma

They are negotiating like businessmen, although they are NOT running Eskom like a business. Bostards!

What a lovely model Eskom has. Run the business into the ground and then get your customers to pay for it (your mismanagement) through higher prices. It didn’t take the SOE long to figure out how untouchable they are. On the other end I wonder how many jobs have been lost to these ridiculous tariff increases business must fork out for every year?

Eskom’s costs are totally bloated. Herein lies the problem not the revenue.
Sort out the ideology, corruption and incompetence and you will be able to DECREASE the price of electricity.

Eskom is one of the main reasons we can’t grow the economy. They don’t have access to credit, now the consumer pays. Next, the government and the taxpayer will run into the exact same problem.

End of comments.





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