Nersa’s yes-no to Eskom

Nersa will conduct performance audits on Eskom’s generation fleet as well as consider initiating its own investigations into governance failure. (Dean Hutton/Bloomberg/Getty Images)

Nersa will conduct performance audits on Eskom’s generation fleet as well as consider initiating its own investigations into governance failure. (Dean Hutton/Bloomberg/Getty Images)

After being delayed by more than an hour by robust debate on what tariff increase should be given to Eskom, the National Energy Regulator of South Africa (Nersa) has granted the technically insolvent power giant permission to increase tariffs by an inflation-busting 9.4% for the 2019 financial year.

The 2019 tariff hike, effective from April, will be 13.8% when you add the 4.41% hike that Nersa allowed Eskom to claw back from customers for shortfalls in the previous three-year period.

Eskom will also be able to increase tariffs by 8.1% and 5.2% in 2020 and 2022.

The decision comes after Nersa held a number of public hearings in seven provinces that it said were well attended.

Nersa chairperson Jacob Modise said more than 119 written comments had been received from stakeholders in labour, government, industry and citizens.

Modise said delays in making the announcement were caused by the fact that Nersa was dealing with two applications from Eskom — the first, an Regulatory Clearing Account (RCA) application, to recoup money it had lost out on due to lower than expected sales; and the second concerning the tariff increase for the next three years.

He said Nersa had been preoccupied with working through the submissions it had received since public hearings were concluded in February.

“We were dealing with a lot of information and submission from the public all of which had to be included, and we are satisfied that we reached the right decision,” said Modise.

While the increases are lower than Eskom had proposed, they are higher than the 4% consumer inflation recorded in January.

In its previous tariff submission, the power utility had asked Nersa for tariff increases of 15% every year for the next three years. This would have meant an allowable income of R219-billion for 2019-2020, R252-billion in 2020-2021 and R291-billion in 2021-2022.

But after lowering its sales forecast for the next three years Eskom came back with increased yearly tariff applications of 17.1%, 15.4% and 15.5%.

The regulator said as part of its decision on Eskom’s tariffs it would also subject Eskom to “extensive prudency reviews, efficiency tests and performance thresholds”.

Nersa will conduct performance audits on Eskom’s generation fleet as well as consider initiating its own investigations into governance failures, which may result in changes to Eskom’s allowed revenue tariffs based on the outcomes of those investigations. 

The struggling state-owner entity has also been allowed to claw back R3.8-billion in revenue from its customers for sales it was not able to make in 2017-2018 — considerably less than the R21.6-billion it applied for.

Nersa has traditionally not offered Eskom the increases it asks for. In the 2018-2019 financial year the utility asked for a 19.9% increase, but was only granted 5.23%.

The less-than-asked-for increase comes on the back of an announcement by Finance Minister Tito Mboweni in his budget speech announcement that Eskom will receive bailouts of R69-billion from the treasury over the next three years.

However, the Treasury said, issues such as Nersa’s tariff decision and savings from Eskom’s cost-cutting efforts could prompt the government to increase its support to Eskom to as much as R150-billion. 

Tebogo Tshwane

Tebogo Tshwane

Tebogo Tshwane is an Adamela Trust financial journalism trainee at the Mail & Guardian. She was previously a general news intern at Eyewitness News and a current affairs show presenter at the Voice of Wits FM. Tshwane is passionate about socioeconomic issues and understanding how macroeconomic activities affect ordinary people. She holds a journalism honours degree from Wits University.  Read more from Tebogo Tshwane

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