Nersa Approves Eskom’s Electricity Price Hike


Eskom has once again received approval from the National Energy Regulator (Nersa) to embark on its tariff increase for the coming months.

Just days after the electricity public utility reported R4.6 billion in profit for the year, Nersa announced its approval of Eskom’s application for an extension to submit a new tariff increase application.

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Its profit for the year ending 31 March 2016 was R4.6 billion while its revenue rose 10.6% to R163.4 billion.

The public utility’s EBITDA increased by 37.4% to R32 billion, up from R23.3 billion reported in the previous year.

While cost savings got to R17.5 billion, above the R13.4 billion target and surpassing the previous year’s R9 billion, said Eskom CEO Brian Molefe. And 57% of funding for 2016/2017 has been secured.

“Financial performance improved against the previous year, and all financial ratios showed improvement due to improved operating results, as well as the conversion to equity of the subordinated government loan and equity injection of R23 billion,” said Eskom CEO Brian Molefe, adding that operating results also improved due to stringent cost containment measures.

Eskom’s application comes after Nersa’s approval of a 9.4% tarrif hike on March 1, which kicked in on 1 April this year.

Nersa took the decision after extensive consultation with government, unions, small and intensive users, who engaged in public hearings in six provinces, according to Nersa chairperson Jacob Modise.

Eskom to Submit a New MYPD Application

In addition to its decision to approve the hike, Nersa asked Eskom to submit a new MYPD application within three months based on the revised assumptions and forecasts that reflect recent circumstances.

It also  said in a statement on Thursday that it had “approved Eskom’s application for an extension to submit the new Multi-Year Price Determination (MYPD) application until 1 April 2017”.

Eskom applied for a RCA balance of R22.8 billion, but the energy regulator only approved R11.241 billion.

Nersa did this because Eskom did not disaggregated the special pricing agreements and international sales when allocating the approved MYPD3 revenues to different customer categories, said Nersa. Businesstech noted

Nersa however explained that Eskom cited statutory consultation requirements and the revision of the MYPD methodology as reasons for the request.

“The Energy Regulator also decided that Eskom’s RCA applications for the second and third years of the MYPD3 (2014/15 and 2015/16) should be submitted together.

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According to Nersa, the two RCA applications will be processed simultaneously once they have been received.

It further stated that in this view, the process of reviewing the MYPD methodology is extended to allow further consultations with stakeholders.

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