Eskom mulls delay in steep tariff hike

Picture courtesy of

Picture courtesy of

Eskom is considering the withdrawal of its application to national energy regulator Nersa for a total average tariff increase of 25.3%, Business has learned.

This follows National Treasury informing municipalities in May any increase that may be granted in response to the application will only be implemented in the 2016/17 financial year, starting July 1, 2016. Eskom had hoped to implement the tariff increase by September.

While consumers may welcome a withdrawal of the application, it may have a serious impact on Eskom’s finances. The utility hoped to raise R32.9 billion over the remaining three years of the current tariff period and will have to look elsewhere in the short term.

Nersa earlier invited stakeholders to make submissions about the application by today. Public hearings are planned for June 23 and 24 and Nersa wants to finalise its decision on June 29. A stakeholder who wanted to attend the meeting says he was told Eskom’s application may be withdrawn.

Nersa spokesperson Charles Hlebela said the regulator had not received any formal notification from Eskom and Nersa was proceeding as planned. However, he confirmed Eskom was reconsidering its position in the light of the Treasury circular.

The implication of the circular is that Eskom cannot implement any increase for its direct customers, while sparing municipalities, as it would be discriminatory. Business learnt Eskom had been desperately trying to discuss the issue with Finance Minister Nhlanhla Nene, but a meeting for this purpose on June 10 was cancelled. Apparently Eskom is hoping to see Nene this week.

Eskom spokesperson Khulu Phasiwe confirmed the meeting did not take place. He said the current position was the tariff application must continue.

In its circular, Treasury says utilities providing bulk services to municipalities have to table their increases in parliament annually before March 15. Nene this year extended that date to May 15.

By that date, Minister of Public Enterprises Lynne Brown had only tabled the 14.24% increase granted earlier (12.69% for Eskom direct customers). This translated into an average municipal tariff increase of 12.2%. Municipal budgets that take effect on July 1, have already been finalised on this basis.

Treasury was aware of Eskom’s application to Nersa to get R32.9 billion extra from tariffs to pay for diesel for its open-cycle gas turbines.”Any decision Nersa makes after May 15 will be deferred to the 2016/17 financial year”, it said.

Eskom may approach Nersa later with an application for a total re-opener.




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