Nersa slams Eskom's high tariff hike requests

Cape Town - The National Energy Regulator of SA (Nersa) had grim advice for Eskom as it proposed a 6.84% tariff increase for municipalities supplying electricity to their residents for Eskom on Tuesday. The regulator approved a 5.23% tariff hike for Eskom itself, against a request from Eskom for a 19.9% tariff increase.

The energy regulator did not hold back on criticising Eskom for its inability to collect revenue efficiently, leading to challenges that have driven the utility to apply for further tariff increases and even impose power interruptions to municipalities defaulting on payments to the power utility.

Nersa’s submission to Parliament’s portfolio committee on energy slammed Eskom’s requests for tariff increases at the levels the power utility sought, saying this did not give due consideration to consumers under pressure in a stagnant economy and depressed economic environment.

“Eskom has perpetually failed to collect the allowed revenues while its expenditure has also continued to exceed that determined by the energy regulator. Continued increases in tariffs have seen commensurate decreases in consumption, which have been attributed to, among others, affordability limits having been reach by customers,” said the regulator’s submission.

Nersa said Eskom must focus on reducing its costs, including its fixed cost base. The regulator said failure to do this would put the utility and consumers in a cycle which would see both come under increasing pressure with limited funds.

“In order to break the vicious cycle, Eskom needs to either reduce its costs and hence its allowable revenue requirement while growing its sales volumes, thereby driving its tariffs to their most efficient level. This would result in smaller tariff increases going forward that will attract additional sales volumes that will result in smaller tariff increases going forward,” Nersa said.

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