Public Enterprises Minister Lynne Brown says she “will study” the National Energy Regulator of South Africa’s decision to grant Eskom – only – a 9.4% tariff increase.
“I will study the Reasons for Decision (RFD) document and discuss with Eskom the implications of this lower than expected increase, including the nature and extent of its applications relative to the Nersa decision,” she said on Tuesday.
Eskom is one of many state owned companies under the Department of Public Enterprises.
Nersa on Tuesday announced that it had granted the power utility a 9.4% tariff hike for the 2016/17 financial year. The decision allows Eskom to recover R11.2 billion instead of the R22.8 billion it wanted in its Regulatory Clearing Account (RCA) application.
Minister Brown said Eskom needs additional revenue to complete its build programme, which includes the Medupi power station.
“I have requested Eskom to provide me with a report on the impact this increase will have on their programmes. I appeal to all municipalities to consider the economic conditions of their citizens and businesses when considering electricity payment increases,” she said.
The Minister called on municipalities to implement their respective indigent policies to cushion the most vulnerable against this increase.
“Moreover, municipalities must also honour their obligations towards Eskom,” she said.
Minister Brown said municipal tariff increases will be implemented from 1 July 2016.
Meanwhile, the power utility said it notes the regulator’s decision not to grant it the variance it had requested for the costs incurred in the production of electricity in the 2013/14 financial year.
“Eskom has noted Nersa’s decision, which yet again doesn’t address the question of Eskom’s continued financial sustainability. In addition, it will have operational consequences,” said Group Chief Executive Brian Molefe.
Molefe said Eskom will study the details of the RFD before commenting on its implication.
“We understand the implementation of the regulatory rules in Nersa’s RCA balance decision. The decision on the revenue variance and certain primary energy costs, including independent power producers, is supported,” said Molefe.
Eskom had applied to recover R8.02 billion for the use of open cycle gas turbines (OCGT). The regulator granted the utility the opportunity to recover R1.252 billion.
“We note with concern the decision on open cycle gas turbines (OCGTs), which will guide Eskom’s operations in the future in terms of balancing the energy supply and demand in a bid to avoid load shedding,” said Molefe.
Eskom has reduced diesel usage in recent months and has made progress in its maintenance plan.
“However, we continue to run a constrained grid. OCGTs are part of our emergency portfolio and have been used in the past to avoid or limit load shedding, with the understanding that we can recover these costs within the RCA process.
“The recovery of diesel costs is now seriously in question with Nersa’s current decision. We will do our best to minimise the risk of load shedding, striking a balance with Eskom’s already depleted balance sheet,” he said.
