Nersa to consult on Eskom’s 32.66% tariff bid

Regulator, utility reach court settlement in R69bn fifth multi-year price determination cases.
If Eskom gets the full increase it is applying for, it will target a further increase of more than 9% in 2024/25. Image: Shutterstock

Energy regulator Nersa has been ordered by the High Court in Pretoria to publish Eskom’s tariff application for 2023/24 on or before 1 August and make a determination by 24 December.

The application is for an increase of 32.66%.

This comes against the backdrop of intense load shedding which on 28 June. , following labour unrest, escalated to Stage 6 for only the second time ever.

President Cyril Ramaphosa is expected to address the nation soon about emergency steps to address the power crisis and get more energy onto the grid.

Read:
We need urgent energy interventions Mr President
We need to act boldly to make load shedding a thing of the past – Ramaphosa

The system has since stabilised to some extent, with load shedding being scaled down to Stage 1 and Stage 2.

Eskom’s steep 32.66% tariff increase bid will be extremely difficult for consumers and business to bear as they are already battling high fuel costs, rising food prices and higher inflation.

Statistics from the Johannesburg Property Owners’ and Managers’ Association, which represents 250 000 affordable housing units in the Joburg inner city, show that the average lessee there spends 5.01% of its household income on electricity. That is a drastic increase from the 2.22% in 2009.

Court order 

The court order follows a settlement between Eskom and Nersa after Eskom challenged Nersa’s earlier decision to reject the application for the 2022/23-2024/25 MYPD5 (multi-year price determination) because it was drafted on the bases of the methodology used for the previous tariff period (MYPD4).

Nersa has been advocating for a change in methodology for some time but has not finalised a new methodology yet.

The regulator on 30 June published a discussion paper on its proposed new methodology for comment and will hold a public workshop on 22 July. The closing date for comment is 29 July.

Read:
Joburg property owners and managers turn up the heat over backdated charges
Nersa hasn’t even given Eskom a CPI increase

Eskom earlier obtained an urgent order which resulted in Nersa processing the tariff application for the current financial, which is Year 1 of MYPD5. It granted Eskom an increase of 9.61%, instead of the 20.5% Eskom asked for.

Eskom applied for allowable revenue from tariffs of R279 billion, but Nersa only allowed R250 billion.

This boiled down to an increase of 3.49%, but when amounts recovered retrospectively from previous tariff periods were included, consumers had to cough up 9.61% more from 1 April 2022.

Nersa recently published the reasons for its decision and Moneyweb understands that Eskom may once again challenge the regulator in court, as it has done with numerous previous tariff determinations – with Eskom succeeding without fail.

The three-year application has not changed from the R335 billion allowable revenue for 2023/24 and R365 billion the next financial year.

Due to the lower increase in the current financial year the base is lower, which results in a higher percentage increase.

If Eskom gets the full increase it is applying for, it will target a further increase of 9.63% in 2024/25.

Settlement

A further court settlement was reached at the Supreme Court of Appeal (SCA) in Eskom’s challenge of Nersa’s decision to deduct R69 billion from its allowable revenue in the previous tariff period (MYPD4) in lieu of government’s equity injection of the same amount over that period.

Read: Nersa concedes failing to put electricity tariff methodology in place

The high court ruled the deduction unlawful, but Nersa lodged an appeal. It however recently conceded and the settlement agreement with Eskom was made an order of the SCA on 6 June.

In terms of the order Nersa must add the amount that is still outstanding in the following four financial years as follows:

2023/24 – R15 billion;

2024/25 – R15 billion;

2025/26 – R15 billion;

2226/27 – R14 billion.

The 32.66% increase Eskom now wants for FY 2023/24 includes this R15 billion additional revenue.

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NERSA needs to outlaw anyone making a Marin from electrity other than a set handling fee.

All that will happen is that those that can will increase self-generation, leaving eskom and councils with less revenue. All that lost revenue is their highest margin revenue from customers that always paid their bills.

End of comments.

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