Energy regulator Nersa on Thursday opened the consultation process for Eskom’s application for an average tariff increase of 19.9% by publishing the application on its website.
If approved, the increase would apply to Eskom’s direct customers from 1 April 2018. Eskom wants municipal customers to pay an average of 27.5% more from 1 July 2018.
The application is for one year only, after Nersa earlier approved a deviation from its multi-year price determination (MYPD) methodology in the light of uncertainty created by litigation regarding its decision to grant an earlier interim tariff increase.
The litigation has been settled in favour of Eskom and paves the way for Nersa to process two further applications for interim increases Eskom lodged earlier.
Those would be over and above the application Nersa published today.
In its current application for 2018/2019, Eskom states that if granted, its allowed revenue would increase by a mere 7%. However, the price impact would be much higher due to lower sales.
This means that when the total required revenue is divided by the projected sales volume to get to a unit price, the impact of a rebasing of sales volumes in line with the current lower electricity demand, results in the higher increase of 19.9%.
In terms of the approved methodology Eskom recovers its increased revenue from municipalities over nine months instead of 12. The reason lies with municipal legislation that allows municipalities to increase tariffs only once a year on 1 July, when the municipal financial year starts. The 27.5% increase applied for, for municipalities, reflects that recovery over nine months.
Nersa has invited stakeholders to submit written comments during the next month, whereafter it will hold a series of public hearings.
- This article was first published on Moneyweb and is used here with permission