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First load shedding and fuel hikes, now Eskom wants 32.66% tariff bid – Nersa to consult
South Africans will be dealt another blow if Eskom’s 32.66% tariff bid is approved. The steep tariff increase bid will be extremely difficult for consumers and businesses to bear.
Photo: iStock
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 following labour unrest, which escalated to Stage 6 for only the second time ever.
South Africa’s energy crisis
Eskom’s steep tariff increase
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.
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 businesses 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.
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.
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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.
This article first appeared on Moneyweb and was republished with permission. Read the original article: Relief for taxpayers
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