NERSA rejects Eskom's tariff hike request

Posted On Tuesday, 30 June 2015 19:07 Published by
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The National Energy Regulator (NERSA) has rejected Eskom’s selective reopener of the third Multi-Year Price Determination (MYPD3) Open Cycle Gas Turbines (OCGTs), which would have resulted in a total price increase of 25.3% for 2015/16.


Brian Molefe

This was announced by NERSA Chairman Jacob Modise on Monday in Pretoria.

He said the energy regulator has assessed the application and reached the decision based on the information and performed analysis. The rejected application includes Short Term Power Purchase Programmes (STPPPs) and the impact of the increase in the environmental levy. The 25.3% price increase would consist of the 12.69% already approved by the energy regulator, the 10.10% selective reopener for OCGTs and STPPP, and 2.51% changed in environmental levy by 2c per kWh.

Modise said NERSA has found the application did not comply with the requirements of the Municipal Finance Management Act and Municipal System Act, in that less than 40 days was given to National Treasury and South African Local Government Association (SALGA) for comments. Eskom submitted its application to the energy regulator on 30 April this year, which led to NERSA conducting a two-day public hearing last week.

Modise said about 30 presentations were made during the hearing by small users, intensive users, civil society organisations, political organisations, trade unions, environmental activists and private individuals. Following issues raised at the hearing, Modise said Eskom’s price increases would result in company closure, job losses, and loss of essential skills and capacity in the economy.

“NERSA should seriously consider awarding only a small portion of the OCGTs funding request, forcing Eskom to make use of the Demand Market Participation (DMP) system already in place. “Experience indicated that Eskom does not make sufficient use of DMP during winter high season periods,” said Modise, reading a list of key issues raised at the hearing.

Modise advised that Eskom make adjustments in the allowed revenue in accordance with the MYPD methodology, or submit a new application for the period 1 April 2016 to 31 March 2019 with indicative projections for the period 1 April 2019 to 31 March 2021. “The door is not closed to Eskom, it can submit a detailed application…” he said.

He said NERSA considered that it is enjoined when making a decision to be consistent with the Constitution of South Africa 1996 and all applicable laws. “The application did not provide the mechanisms on how the proposed increase, if granted, can be implemented in the current financial year in a manner that is consistent with the requirements of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003).

“Furthermore, any mid-year (additional) price increases to the bulk price increase for the 2015/16 financial year cannot be considered as Section 28(60 of the MFMA, prescribes that a municipal tax or tariffs may not be increased during a financial year, i.e. after 1 July 2015,” said Modise. He said the application does not align with the credible long-term planning and certainty that the MYPD seeks to achieve, and it actually works against such.


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