Eskom may increase electricity tariffs

2014-05-15 11:20

Eskom will know by the end of the month if it needs to increase its electricity tariffs.

In a statement today, the state-owned enterprise said it was awaiting a determination from the National Energy Regulator of SA (Nersa).

It asked Nersa last year to evaluate and approve the regulatory clearing account balance for its previous multi-year price determination control period, between April 1 2010 and March 31 2013.

The regulatory clearing account is a mechanism that allows Eskom to adjust for over or under recovery of revenue because initial price determinations are based on projections and assumptions.

Nersa subjects these variances to a prudency review. If the variance of the regulatory clearing account balance is less than 2%, no action is taken in that year. If the variance is between 2% and 10%, tariffs are adjusted. If it is more than 10%, it is recommended that affected parties be consulted in a formal process.

Eskom said customers could see an increase or decrease in the price of electricity as a result of its submission.

“Such mechanisms are a common feature in electricity regulation world-wide, especially where the generation sector is regulated,” said Eskom acting CEO Collin Matjila.

Eskom would keep all parties informed of any developments. The adjustment was likely to take place from April 1 next year.

Last year, Eskom applied to Nersa to increase its tariffs by 16% for the period April 1 2013 to March 31 2018. Nersa granted five yearly increases of 8%.

Eskom had stated for some time that the lower-than-expected increase left it with a R225 billion shortfall between 2013 and 2018.

Public Enterprises Minister Malusi Gigaba welcomed the increase ruling a few months after it was announced, but said it presented problems Eskom would need to deal with.

“We are studying it in detail, because we need to understand what will happen to Eskom’s operations through the build programme over the next five years,” he said at a Cape Town Press Club breakfast at the time.

Last month, Eskom released a statement assuring the nation that its cash flow was “very stable”.

The power utility said it managed its cash flow responsibly, and always made sure it had sufficient liquidity.

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