Back to the drawing board for Eskom’s proposed tariff hike

Eskom will have to reconsider its financial options after the National Energy Regulator of South Africa (Nersa) rejected the utility’s application for a 25.3 percent tariff increase on Monday.

(Also read our article: More darkness, now that Eskom failed to get 25%?)

Eskom had requested a further 12.61% increase, after it was awarded a 12.69% tariff increase from 1 April this year.

After detailing the shortcomings in Eskom’s selective reopener application, Nersa’s Chairperson Jacob Modise said that Eskom must submit a proper application which is consistent with the Constitution of South Africa and the Municipal Finance Management Act.

A difficult balancing act

CapeTalk host Kieno Kammies spoke with Thembani Bukula, regulator member at Nersa, about why the application was denied and the likelihood of a re-application.

Bukula says that the function of Nersa requires a delicate balance between the different interest groups.

We consider the requirements of our customers, domestic business, investors and the utility itself. We have to balance the decision against its sustainability. In this application we looked at other legal requirements.

Thembani Bukula, regulator member at Nersa

He says that even if Nersa had granted the proposed increase, municipalities would not have been able to implement it because of budgeting regulations within the Municipal Finance Management Act. If Eskom re-applies, the submission would only affect the changes in the 2016/2017 financial year.

Listen to the full conversation with Thembani Bukula on CapeTalk's Breakfast with Kieno Kammies:

Raising a red flag

702 presenter John Robbie spoke with project director at the Energy Intensive User Group of Southern Africa (EIUG), Shaun Nel, who says that the decision by Nersa is a testimony to its impartiality.

I think we’ve had confidence in the independence of the regulator. We had a sense that the nature of the application would raise some concerns for Nersa, which is one of the primary reasons why it was rejected.

Shaun Nel, project director at EIUG

Nel says that the application itself was irregular and that the revenue allocations that it applied for, was because it was unable to maintain transparency about the production of electricity at the utility.

Listen to the full conversation with Shaun Nel on 702's John Robbie Show:

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