Eskom tariff increase to help buy diesel

Eskom says it needs to raise prices by almost double the rate the National Energy Regulator (Nersa) has so far allowed so the company can buy in electricity and diesel to help curb shortages in its own generation capacity.

“What we’re here for is to ask for what we think is fair,” Eskom acting chief executive Brian Molefe said at public hearings held by the national energy regulator in Johannesburg Tuesday.

Nersa is holding two days of consultations after Eskom, which is struggling to meet demand in Africa’s most-industrialised economy, asked to raise prices by as much as 25%, or 12% points more than first allowed for the year to March 31 2016.

In October, the utility got permission from the regulator to increase charges by an average 13% starting April 1 to help it recover unbudgeted costs for the three years through 2013. The regulator had previously approved an average annual increase of 8% in each of the five years through March 2018. The inflation rate was 4.6% in May.

In its new price application, Eskom is asking for an additional 9.6% points to fuel gas turbines that it uses as a last resort, and to carry on power purchases from companies such as Sasol and Sappi.

Environmental levy

It had also sought a further 2.5% points to pay for a 57% increase in the environmental levy to 5.5 cents a kilowatt-hour, which was announced by Finance Minister Nhlanhla Nene in his budget speech in February, but has yet to be introduced. Should the National Treasury not charge the levy, Eskom won’t have to ask for that amount, Molefe said.

If the levy is published in the Government Gazette after July 1, the associated tariff increase can only take effect in the year starting April 1, 2016, Nersa Chairperson Thembani Bukula said in an interview Tuesday.

The City of Cape Town would need an additional R700-million to purchase power at the higher rate, Deputy Executive Mayor Ian Neilson said at the hearing.

Not being able to pass increases on to customers “certainly will be a financial position that we aren’t willing to accept”, he said.

Sibanye Gold, the biggest producer of South African gold, would lose as much as R8.2-billion in revenue from 2015 to 2017 from operations that would have to be closed if the increase were granted, Technical Services Senior Vice President Peter Turner said. The company, which buys about 1.6% of the electricity the utility generates, forecasts a power bill of R4.1-billion by 2017, compared with R2.8-billion last year. – Bloomberg

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Paul Burkhardt
Paul Burkhardt works from Johannesburg. Bloomberg reporter covering oil/gas, renewables, mining and unions in South Africa and sub-Saharan region. Retweets not endorsements. Paul Burkhardt has over 1431 followers on Twitter.

Related stories

Businesses should use alternative energy sources, industry bodies advise

Business associations are urging companies to continue seeking alternative energy sources in light of Eskom’s court judgement which would allow the utility to bump up electricity prices up to 15% from next year April 2021.

Manage urban transformation to avoid infrastructure blockages

It is possible to urbanise without congestion and the attendant ills through emphasis on better institutions, writes Eddie Rakabe

Eskom cancels dodgy R100m tender linked to Mabuza’s niece

An internal investigation revealed ‘irregularities’ in the process of awarding the contract

Solar stuck where sun don’t shine: State spends R289m to store solar water heaters

The national solar water heater programme is set to take off once again this year, but meanwhile the government is spending millions on storing heaters that have yet to be installed

Another reason why Eskom is the bull in the fiscal china shop

Although mismanagement and corruption play a role in the financial state of affairs at municipalities, it is not the only reason they are failing

Eskom must lead the energy shift

Any plans to change from coal-fired power to renewable and affordable electricity must include turning the power utility into a true public entity

Sekhukhune’s five-year battle for water back in court

The residents of five villages are calling for the district municipal manager to be arrested

Fees free fall, independent schools close

Parents have lost their jobs or had salaries cut; without state help the schools just can’t survive

Vaccine trial results due in December

If successful, it will then have to be manufactured and distributed

White men still rule and earn more

Women and black people occupy only a few seats at the JSE table, the latest PwC report has found

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday