Engineering News 2004/05/20

South Africa’s National Electricity Regulator (NER) yesterday announced that Minister of Minerals and Energy Phumzile Mlambo-Ngcuka has upheld the NER decision to approve an average tariff increase of 2,5% for power utility Eskom, with effect from January 1, 2004.

This announcement follows after the minister requested a special task-team to advise her on Eskom’s appeal against the NER’s determination of the annual price increase for 2004.

The price increase is expected to give Eskom a 4,9% increase in its revenues in 2004, the NER said in a statement.

The approval of the 2,5 % increase, against Eskom’s requested 8,5%, has been based on an analysis of Eskom’s budgets, its audited financial statements and the returns it requires to meet the needs of future electricity customers in a ‘sustainable manner’.

"In terms of its mandate, the primary way in which the NER contributes to achieving the national objective of reducing inflation is to put downward pressure on Eskom’s costs. However, the NER is also obliged to set Eskom’s prices at a level that allows it to recover appropriate costs. These costs may not always move in line with inflation.

"The NER has made important progress this year in putting pressure on costs and will, in future price increase applications, introduce further measures aimed at encouraging Eskom to increase productivity," said NER board chairperson Collin Matjila.

The NER emphasised that Eskom’s customers should be aware that their individual price increases may not necessarily be adjusted by 2,5 %, as the increase will depend on the effects of annual tariff structural adjustments.

Similarly, the price increases faced by customers served by municipalities may also differ from this figure, as other factors, including tariff structuring within municipalities, affect prices.

Eskom had not commented on the decision at the time of publication.