Eskom asks for reduced tariff increase

Eskom has reportedly requested a reduced tariff increase of 9.5%, down from an initial 12.7%, according to Reuters, citing acting chief executive Brian Molefe.

Molefe was speaking at a public hearing held by the National Energy Regulator of South Africa (Nersa).

In May, Eskom made an urgent application to increase the electricity tariff by 25.3% for the 2015/2016 financial year. This included the 12.69% price increase Nersa had already approved.

Various bodies were able to provide written submissions in response to Eskom’s re-opening of tariff negotiations, last week.

In a joint written submission to Nersa, a group of academics noted that since the initial electricity blackouts in South Africa in 2008, the energy regulator has granted Eskom an annual average increase of 22% a year for seven years.

Molefe was put under the spotlight by the National Energy Regulator (Nersa) on Tuesday, as he requested a tariff increase to curb load shedding and to increase maintenance on its power stations.

The Nersa panel challenged Molefe on various issues that he did not have answers to and at one point he remarked that “I am still new at Eskom”.

Nersa had possession of a concerning letter from Eskom to Treasury as well as a report from Eskom that showed worrying signs about the longevity of Eskom’s fleet of power stations, which Molefe had not seen before.

They compromised to let him see the documents and to respond later in the day.

News24Wire reported on Tuesday (23 June), that Molefe told the public hearing regarding the MYPD3 Selective Re-opener that, while Eskom had already been granted a 12.69% tariff increase for 2015/2016, Eskom desperately needed a further increase due to the new build delays as well as its ageing fleet.

He said open cycle gas turbines (OCGTs), which produced 2,400 MW to minimise the severity of load shedding, was a money burner that required R10.9bn per year. This contributed to the additional 6.43% tariff increase he was now requesting on top of the 12.69% increase.

Molefe said Eskom was also entering agreements for the short-term power procurement programme (STPPP) to add further generation capacity to help ease load shedding, which cost around R5.3bn per year. This contributed to the additional 3.15% tariff increase.

Then Molefe said that if the environmental levy increase is gazetted, it would need a 2.51% additional tariff increase as a “pass through of levy costs”.

The total new tariff increase would total 24.78%.

After Eskom’s presentation, the Nersa panel started listening to submissions from a variety of stakeholders, many of whom are opposing Eskom’s tariff increase.

Nersa will make a decision regarding the increase at the end of the month, but the implementation of the possible increase won’t take effect in July.

Reporting with News24Wire

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Eskom asks for reduced tariff increase