Nersa put its foot down with Eskom, approving only a 5.23% increase in power charges instead of the power utility's requested 19.9 percent increase in its charges. Photo: file

JOHANNESBURG - The National Energy Regulator of SA (Nersa) has approved a 5.23percent average tariff increase for Eskom, which is a far cry from the 19.9percent that the power utility had requested for the 2018-19 financial year.

Nersa effectively gave Eskom R190.3billion of the R219.5bn the utility had requested for total allowable revenue for the period.

Nersa chairperson Jacob Modise said that in reaching the decision, the regulator had considered the public interest and input.

“The methodology that Nersa used for the regulation of Eskom’s allowable revenues also entrenches the premise of public interest by highlighting that the energy regulator may apply reasonable judgement on the application by considering what may be in the best interest of the overall South African economy and the public,” said Modise.

The tariff will, however, still have far-reaching financial implications for the cash-strapped power utility.

In its submission to Nersa, Eskom emphasised the precarious nature of its financials, saying the current electricity tariffs were not cost reflective.

It said investors were willing to fund it but wanted assurance that it would be willing and able to repay debt.

Eskom said it was disappointed with the Nersa decision, saying it had made the application in terms of the Multi-Year Price Determination (MYPD) methodology which allowed it to submit any changes permitted by the methodology.

“This corresponds to a revised average standard price increase of 18.9percent.”

The power utility said it would await the regulator’s reasons.

“The 'reasons for decision' document will enable Eskom to make an assessment on the impact to the business and then make a decision on the way forward,” Eskom said.

During public hearings on the application, a number of organisations and companies were opposed to the relatively high tariff increase, with a number of them voicing displeasure with Eskom’s high costs, poor forecast of sales volumes, high costs of Eskom’s capital expenditure programme, and rising maintenance costs.

Modise said Nersa had to regulate the energy industry in a manner that balanced the interests of energy producers and those of consumers.

“This is never an easy task, for inevitably it is influenced by the greater economic environment, both locally and internationally and as directed by the policy environment of the government,” said Modise.

- BUSINESS REPORT