Johannesburg - Power utility Eskom on Thursday said it could apply for further electricity hikes after the National Energy Regulator of South Africa (Nersa) granted it room to hike electricity tariffs by only 2.2 percent in the 2017/18 financial year.
Eskom said it would study the Nersa recommendation and consult its stakeholders to determine whether the hike would be enough to fulfil its mandate.
Spokesperson Khulu Phasiwe said they would consider applying for further increases as Nersa had left the door open for the utility to do so.
“We are studying the application and we would want to see how it fits in with our overall business operations,” Phasiwe said. “If we feel it is not enough, we might submit a new application.”
Eskom’s financial year begins on April 1, which leaves the utility with a few weeks to make its decision on the Nersa directive.
Yesterday, Nersa said it would grant Eskom only 2.2 percent for allowable revenues for 2017/18 - the last year of the third multi-year price determination (MYPD3).
Since the beginning of the MYPD in 2013, Eskom has imposed above-inflation increases on its customers.
During the 2016/17 financial year Eskom raised electricity tariffs by 9.4percent, following a 12.7percent hike the previous financial year, sparking outrage from industry and households.
Eskom has maintained that the hikes were needed to boost its balance sheet and to prevent load shedding.
On Wednesday, the National Treasury warned in its Budget review that the scale of tariff hikes and recovery of municipal debt would affect Eskom’s financial position.
The Treasury said the power utility had increased planned borrowings in 2016/17 from R46.8 billion to R68.5 billion as a result of lesser tariffs in that period. “The increase results from Eskom’s revised assumptions of cost savings and lower than anticipated tariffs during the current price determination period,” the Treasury said.
“From 2017/18, foreign loans are expected to account for 77.3 percent of Eskom’s total funding,” it added.
Read also: Nersa approves 2.2% tariff increase for Eskom
But, on Thursday, Nersa said the power utility would be granted only a 2.2 percent increase for the period in order to compensate for its R205 billion allowable revenue in the new financial year.
The regulator said Eskom could bring forward an application for further tariff increases if the power utility experienced “cash-flow risks”.
Nersa chairperson Jacob Modise said Nersa had confirmed the allowable revenues on the basis of the approved MYPD3 revenues and average price for 2017/18.
“The allowed revenue will be able to cover all of Eskom’s allowed costs, plus a return to the value of R33.6 billion as per the MYPD3 decision. The allowable revenue also includes R23bn for the independent power producer purchases as a cost pass-through in line with the MYPD3 methodology,” Modise said.
The Nelson Mandela Bay Chamber of Commerce, which last year obtained a high court order against Eskom’s 9.4 percent increase, described the 2.2 percent increase as a victory for electricity users.
The chamber’s deputy president, MC Botha, said the new tariff structure would benefit the country at large. “It will not only result in reduced electricity prices for businesses and homes, but it will also secure thousands of jobs by making industry more competitive.”