Nersa’s yes — no to Eskom

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-then-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-million 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. 

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.

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. 

Related stories

Eskom could be fined R5-million over pollution at Kendal power station

The power utility is being taken to court by the Minister of Environment, Forestry and Fisheries in a first-of-its-kind criminal prosecution

Editorial: Crocodile tears from the coalface

Pumping limited resources into a project that is predominantly meant to extend dirty coal energy in South Africa is not what local communities and the climate needs.

ANC: ‘We’re operating under conditions of anarchy’

In its latest policy documents, the ANC is self-critical and wants ‘consequence management’, yet it’s letting its members off the hook again

‘We struggle for water, but power stations and coal mines don’t’

A proposed pipeline will bring water polluted with Gauteng’s sewage to the Waterberg in Limpopo to boost the coal industry during the climate crisis

Sudan’s government gambles over fuel-subsidy cuts — and people pay the price

Economists question the manner in which the transitional government partially cut fuel subsidies

The solar energy market will grow if innovative business models are developed

Southern African suppliers should consider entering into partnerships with financiers to offer off-grid, hybrid and prepaid solutions to customers

Subscribers only

Dozens of birds and bats perish in extreme heat in...

In a single day, temperatures in northern KwaZulu-Natal climbed to a lethal 45°C, causing a mass die-off of birds and bats

Q&A Sessions: Frank Chikane on the rainbow where colours never...

Reverend Frank Chikane has just completed six years as the chairperson of the Kagiso Trust. He speaks about corruption, his children’s views and how churches can be mobilised

More top stories

ATM withdrawal halts no-confidence vote against the president

The party wants the court to rule on the secret ballot issue first, with the case set to be heard in early February

Ruling deals crushing blow to zero-hours contracts

Ferrero factory workers have won the first battle in what might become one of South Africa’s next wars on casual and precarious work

Eusebius McKaiser: Mpofu, Gordhan caught in the crosshairs

The lawyer failed to make his Indian racist argument and the politician refused to admit he had no direct evidence

Corruption forces health shake-up in Gauteng

Dr Thembi Mokgethi appointed as new health MEC as premier seeks to stop Covid-19 malfeasance

press releases

Loading latest Press Releases…