Electricity utility Eskom has been given the go-ahead to raise its prices by 8,4% next year, the National Electricity Regulator (NER) announced on Monday.
The decision was taken at an NER board meeting on Friday, it said in a statement. ”This increase will be passed on to all Eskom’s customers, and those customers being served by municipalities will see a similar increase.”
Eskom had applied for an increase of Consumer Price Index plus three percent. At the time of its application, CPI was six percent. The NER said it took into account inflation and used a rate of return method in making its decision. It also took into account local conditions, and used an approach allowing Eskom to recover reasonable operating costs.
According to its calculations, Eskom was entitled to a rate of return on its assets of 13,31%, the regulator said. The NER decided, however, to award a rate of return of only 12%.
”The difference in these rates of returns represents a massive saving to consumers. This also represents a decrease on the return allowed last year.”
Although this meant Eskom would have to continue tightening its belt, the result was a balance between low prices and the interests of Eskom, the NER said.
The regulator has for the past three years awarded Eskom price increases lower than those applied for.
”The NER recognises that electricity is the engine for economic growth and social development in South Africa. It is therefore vital to ensure that electricity prices are kept as low as possible to stimulate economic development and make electricity affordable to disadvantaged communities.” – Sapa