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Eskom insists it has applied for a 20.5% tariff hike, as Nersa table shows 32.15%

Photo from previous tariff hearings.

Nersa hearings into Eskom's revenue application will be held virtually between January 17 and 21

Photo by Creamer Media

13th December 2021

By: Terence Creamer

Creamer Media Editor


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State-owned electricity utility Eskom continues to maintain that its revenue application, including the implementation of regulatory clearing account (RCA) decisions already made, would translate to a 20.5% increase in the standard tariff on April 1, rather than the 32.15% hike outlined in a ‘pro forma’ table produced by the regulator.

The National Energy Regulator of South Africa’s (Nersa’s) figure, which has been shared with Engineering News & Mining Weekly, is based on revenue from standard tariff customers rising to R302.9-billion in 2022/23, from R245.7-billion in 2021/22.

It differs from the R353.9-billion published in a consultation paper on the 2022/23 tariff increase, which pointed to a percentage price increase based on sales of 171 549 GWh of 54.35% for next year.

The pro forma figure includes R261.9-billion in allowable revenue that Eskom is seeking to recover from standard-tariff customers in the upcoming year. (The utility is applying for allowable revenue of R279-billion in total, including revenue arising from standard tariffs, negotiated pricing agreements and international customers).

The price increase that will be announced on February 25 is confined to the one that will be applied to standard-tariff customers.

Over and above the R261.9-billion, Nersa’s figure includes R14-billion arising as a result of RCA’s already approved, but not yet liquidated, for the third multiyear price determination (MYPD3) period, as well as R3.5-billion from the 2019/20 RCA, R742-million for the Short-Term Power Purchase Programme (STPPP) and a “government support refund” of R23-billion.

The refund referred to relates to a court ruling that Nersa’s decision to exclude a R69-billion equity injection from its MYPD4 allowable revenue was unlawful and should be added back to Eskom’s allowable revenue in future.

Nersa and Eskom agreed to a joint court order, for 2021/22, whereby R10-billion of that injection was recouped through the tariff, with the R59-billion balance to be recouped in future.

Eskom has indicated that it has not included any recovery of the R59-billion in its 2022/23, owing to the fact that no date has as yet been set for a Supreme Court of Appeal hearing on the matter.

However, Nersa has indicated that the appeal does not relate to the refunding of the equity, but rather to whether the ruling had breached the separation of powers by ordering that the average standard tariff for the 2021/22 financial be increased from 116.72c/kWh to 128.24c/kWh.

Although Eskom has indicated that a total of R103-billion in revenue is still awaiting court decisions and that another R10.7-billion in RCAs have been submitted, the utility is not expecting these amounts to be recovered in 2022/23 due mainly to the timing of the processes.

It also has stated that there is no accommodation for STPPP-related revenue on its own, as this is included in IPP revenue.

Eskom also stresses that it is not possible to compare an increase in allowable revenue as a percentage, as the comparison must be based on the increase in the actual tariff, which was 133.64c/kWh in 2021/22, after the R10-billion portion of equity-injection joint court order.

Should it increase to 161.04c/kWh as applied for, the increase would be 20.5%, Eskom adds, noting that the percentage increase is what the consumer experiences as a price adjustment.

In line with a December 3 court order directing Nersa to decide a tariff for 2022/23 by February 25, Nersa has set 16:00 on January 14 as the closing date for stakeholder comments on the consultation paper on Eskom’s revenue application and will conduct virtual provincial hearings between January 17 and 21.


Edited by Creamer Media Reporter



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