South Africa is possibly staring at a nearly 50% increase in electricity costs this year, if Eskom decides to go ahead with court action to review the National Energy Regulator of South Africa’s (Nersa) decision to only award the utility with a 5.23% increase for 2018/19.
The 5.23% increase begins on April 1 for Eskom’s direct customers, July 1 for municipalities, and is valid to April next year.
Nersa allowed Eskom to submit an application in December for revenue for 2018/19 for R2.1 billion, which translated to a possible 19.9% average price increase.
Ted Blom, energy expert at Mining and Energy Advisors, said the only way for Eskom to change Nersa’s mind was to take it on review to court. “And whoever loses could pay up to R1 million.”
On January 23, Nersa published Eskom’s request for R66.6 billion for its Regulatory Clearing Account (RCA) for public comment.
The RCAs are the nest egg Eskom is required to keep in case of changes in the actual conditions for specifically identified cost items when compared to assumptions made when its Multi-Year Price Determination application was considered.
It’s here the other 30% could be added to consumers bills.
“The money for the RCA will be added onto the current tariff,” said Blom.
“The only issue is whether Eskom does it in one year or three years.”
It’s a scheme similar to the much-maligned idea where proposed massive tariff hikes for water in Cape Town saw a huge outcry and was eventually dismissed.
While the plan to review Nersa’s decision has been around for a while, added pressure came this week following the Fitch Global ratings agency downgrade of Eskom – the first to do so following the new Eskom board’s announcement of its interim results.
Despite the surprise downgrade, the Department of Public Enterprises yesterday expressed its support for the new board under Jabu Mabuza.
“The board has the full support of government,” said spokesperson Colin Cruywagen.
“The country has the highest expectation in the new board to reposition Eskom, tighten its governance systems, and traverse a changing energy environment while placing Eskom on a sound financial footing.”
The decision for the RCA will be made on August 2, says Eskom, after public hearings on the matter in May. Public comments close on March 23.