Eskom's tariff application 'meaningless'

By Drum Digital
23 January 2013

Eskom's application for a 16 percent rise in electricity tariffs is probably meaningless, National Planning Commission member Anton Eberhard said on Wednesday.

Eberhard, a professor and energy expert, said this also applied to the resulting price determination by the National Energy Regulator of SA (Nersa).

"Why do I make this, what might be [considered], a controversial statement? I make it on the basis of history. If the future is anything like the past, then those [electricity] prices will be different [to what was estimated]," he told the Cape Town Press Club in Cape Town.

"If you look at the last six years, and we've had two three-year multi-year price determinations. In each case, Eskom applied for something, the regulator decided something and when you actually look at the price, the increase is different."

Eberhard cited the period 2007/8 as an example. The original Nersa determination was for a 5.9 percent increase. Eskom applied for a revision to 18.7 percent. Nersa approved 14.2 percent.

Eskom then applied for another revision to 60 percent and Nersa eventually agreed to 27.5 percent.

"It's kind of, pick a number, any number. I think at minimum what it says is that neither the regulator nor Eskom are able to forecast prices very accurately, and what's behind that is insufficient, inaccurate cost management and financial management," Eberhard said.

"I think this is relevant to us going forward and it will inform one of the recommendations that I'll make."

The energy regulator is holding public hearings on Eskom's proposed revenue application multi-year price determination 2013/14, otherwise known as MYPD3.

Eskom has asked for a 16 percent increase in electricity prices each year for the next five years.

This would take the price of electricity from 61 cents a kilowatt hour in 2012/13 to 128 cents a kWh in 2017/18 -- more than doubling the price over five years.

The current multi-year price determination, MYPD2, ends on March 31, 2013.

The proposed tariff increases have been met with fierce opposition from small businesses, unions, and individuals.

-by Sapa

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