By Lehlohonolo Lehana.
The National Energy Regulator of South Africa (Nersa) has agreed to an 18.65% increase in electricity tariffs, effective from 1 April this year.
Nersa’s decision relates to the fifth Multi-Year Price Determination (MYPD) for Eskom for year two (2023/24) and year three (2024/25).
The approved increase is lower than what Eskom had applied for but is still significant, and far higher than inflation.
In September 2022, Eskom applied for a 32% price hike for 2023/24, and a 10% hike in 2024/25, equating to a recovery of R351 billion and R381 billion, respectively.
Nersa is allowing Eskom to recover R318 billion for 2023/24 and R352 billion for 2024/25.
According to Nersa the decision was taken against the backdrop of tough economic circumstances, including high interest rates, low growth, high unemployment and load shedding.
In determining the hikes, it tried to balance these various factors as well as Eskom’s service needs, it said.
Presenting the motivation for the approvals, regulator member for electricity, Nhlanhla Gumede, said that the process to determine a fair increase was riddled with issues and problems that needed to be addressed.
“It was a difficult matter,” he said, adding that the regulator was ‘between a rock and hard place’ in determining the grantable increase.
While the determination is based on the regulator’s methodology, the methodology itself is based on the relevant laws, which have various goals. This includes protecting end users, protecting infrastructure, encouraging investment, and promoting equality.
Gumede said a massive issue highlighted by the electricity subcommittee was Eskom’s overuse – or abuse, as some on the committee called it – of its Open Cycle Gas Turbines (OCGT). These turbines are only supposed to be used during peak periods and in emergency situations to keep the grid stable.
Eskom, meanwhile, has been leaning heavily on the OCGTs as a primary power supply and recently reported a loss of R12.3 billion for the year ended in March 2022.