The National Energy Regulator of South Africa (Nersa) will announce its decision on Eskom’s fourth multiyear price determination (MYPD4) application, as well as the State-owned utility's 2017/18 regulatory clearing account (RCA) submission on Thursday March 7.
The determination will be released at Nersa's Kulawula House head office, in Pretoria at 13:00.
In its original MYPD4 submission, Eskom requested allowable revenue of R219-billion for 2019/20, rising to R252-billion in 2020/21 and R291-billion in 2021/22, which translated to three yearly tariff increases of 15%.
It later lowered its sales forecast for the period, which resulted in the tariff application being revised upwards to 17.1% for 2019/20, 15.4% for 2020/21 and 15.5% for 2021/22.
The MYPD4 application was made ahead of Finance Minister Tito Mboweni's announcement that government would be injecting R23-billion a year into the utility for a period of up to ten years to help the utility pay down its debt and to create financial capacity for an increase in plant maintenance.
The 2019/20 increase being sought by Eskom would be in addition to a 4.41% hike already approved for the year, which had arisen following Nersa’s adjudication, in 2018, of RCA applications for three of the five years falling within the MYPD3 period.
In other words, electricity prices would be hiked by 21.5% from April 1 should Nersa approve Eskom's full request. The regulator has traditionally refrained from granting Eskom all the revenue it has requested in previous submissions.
The MYPD4 application was accompanied by a further RCA application for 2017/18. If approved, it could result in a further 2.8% hike being introduced from 2021/22 and sustained in the tariff base for a further three years.
Those business and community stakeholders who made presentations during recent Nersa-convened public hearings called on the regulator to reject the hikes, arguing that they would place jobs, growth and investment at risk.
While some argued that no increases should be permitted until Eskom had cleansed itself of corruption and inefficiency, others suggested the increases be capped at the level of inflation until the utility was restructured for sustainability.
Eskom noted that the RCA approval alone, together with a pass through of about 2% for current and future independent power producer contracts, would already result in a tariff increase in line with inflation. Such a hike, it added, would be before any allocation for fixed and variable cost increases.
The utility also used the recent Nersa hearings to warn that it would be reporting a R20-billion loss for the year to March 31, 2019, and that a similar level of loss should be expected in 2019/20, even if Nersa approved the full tariff increase sought.
However, various stakeholders cautioned that electricity had already reached the limits of affordability and that some sectors, notably gold and platinum mining, could be forced to close production.
Minerals Council South Africa warned that the increases being sought by Eskom could “render almost all gold operations, representing 96% of gold production, loss-making or marginal in a short period of three years, threatening a total of 98 509 jobs”.