JOHANNESBURG – SOUTH Africa’s economic woes worsened yesterday with the National Energy Regulator of SA (Nersa) giving Eskom permission to hike tariffs in April next year in a move that analysts said could see electricity rising by between 10 and 19.4 percent increase next year.
Nersa said it had approved Eskom’s liquidation of the Third Multi-Year Price Determination (MYPD3) Regulatory Clearing Account (RCA) balances for the 2014/15, 2015/16 and 2017/18 financial years over a four-year period.
Nersa has granted Eskom a 4.1 percent increase effective April next year under the regulatory clearing account. Eskom has also applied for a 15 percent tariff increase, which Nersa is considering, although the actual increase – which will come into effect in April next year – could be higher or lower.
The move comes as the cost of fuel, one of the major factors stalling economic growth, went up yesterday, heralding a litany of other associated price increases in the food basket, energy mix and inflationary pressures.
“The impact will be very significant; consumers can expect at least a double inflation increase next year, it will certainly tip over the inflation rate,” energy analyst Chris Yelland said.
Nersa awarded Eskom the green light to raise tariffs and to recover R31.1 billion of the R66.6bn the power utility applied for, to recover its costs for the period in the next four years.
The Energy Intensive Users Group of Southern Africa (EIUGSA), whose members account for about 40 percent of electrical energy consumed in the country warned that increases in electricity tariffs would exacerbate Eskom’s “death spiral”.
In submissions to Nersa on the regulatory clearing account, EIUGSA chief executive Xolani Mbanga said the applications were a result of Eskom’s inability to complete and put into commercial operation the new power stations and its inferior maintenance on the existing generation fleet.
He said the demand for electricity during this period was far less than the installed capacity of Eskom and had the generation fleet been optimally performing there would have been no need to purchase additional power on short-term contracts and from international utilities.
“From whichever angle or perspective this is considered, it is unfair to electricity consumers,” Mbanga added.
Eskom deputy spokesperson Dikatso Mothae said yesterday that the utility had noted Nersa’s decision on the liquidation of the MYPD3 regulatory clearing account balance for the three years.
“This means that Eskom is required to add a further R8.1bn to the revenue decision for each year of MYPD4 period that is being considered by Nersa,” she said.
Ted Blom, a partner at Mining and Energy Advisors, said the decision would burden an already overloaded consumer with additional costs prematurely.
Blom said the recovery period included the “Gupta years” under former president Jacob Zuma’s administration, when confidence was low and there was reportedly looting at state-owned enterprises, more especially Eskom.
“There should first have been a forensic audit into Eskom’s expenditure during that period so it is clear where the money being recovered went to.
“There is also the ongoing state capture inquiry, which is likely to come up with findings for that period,” Blom said.