Business News 14.9.2017 07:47 am

Nersa kicks off consultation for huge Eskom tariff increase

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Power giant wants 19.9% more, 27.5% from municipalities.

Energy regulator Nersa has on Thursday opened the consultation process for Eskom’s application for average tariff increase of 19.9% by publishing the application on its website.

If approved, the increase would apply to Eskom’s direct customers from April 1 next year. Eskom wants municipal customers to pay an average of 27.5% more from July 1.

The application is for one year only, after Nersa earlier approved a deviation from its multi-year price determination (MYPD) methodology in the light of uncertainty created by litigation regarding its decision to grant an earlier interim tariff increase.

The litigation has been settled in favour of Eskom and paves the way for Nersa to process two further applications for interim increases Eskom lodged earlier.

Those would be over and above the application Nersa published today.

In its current application for 2018/19 Eskom states that if granted, its allowed revenue would increase by a mere 7%. However the price impact would be much higher due to lower sales.

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This means that when the total required revenue is divided by the projected sales volume to get to a unit price, the impact of a rebasing of sales volumes in line with the current lower electricity demand, results in the higher increase of 19.9%.

In terms of the approved methodology Eskom recovers its increased revenue from municipalities over nine months instead of twelve. The reason lies with municipal legislation that allows municipalities to increase tariffs only once a year on July 1, when the municipal financial year starts. The 27.5% increase applied for, for municipalities, reflects that recovery over nine months.

Nersa has invited stakeholders to submit written comments during the next month, whereafter it will hold a series of public hearings

Here is the timetable for the public consultation:

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