Page 10 - AfrElec Week 04 2022

AfrElec TARIFFS AfrElec

South African regulator faces

difficult choice on whether to grant

Eskom proposed 20% tariff hike

SOUTH AFRICA SOUTH Africa is between the devil and the deep Mpho Phalatse respectively, made direct rep-
blue sea on whether to hike electricity prices. resentations to Nersa during the hearings, with
South Africa’s public hearings hosted last Phalatse arguing in her presentation that an
week by the National Energy Regulator of South above-inflation hike would have a “devastating
Africa (Nersa) on a proposed electricity tariff impact” on the citizens of Johannesburg, erode
hike by the state-owned utility showed that there business confidence and disrupt the economic
is no easy decision. recovery.
Eskom wants to raise tariffs by a mammoth Energy Intensive Users Group CEO Fanele
20.5% for 2022/23, with both residential and Mondi said that while not all the revenue being
industrial electricity interest groups indicating requested was within Eskom’s control, including
at the hearings such an increase would bank- the IPP payments and the environmental levies
rupt them. Eskom’s proposal is far above South and taxes, it nevertheless felt that the increase
Africa’s inflation, and would be huge burden on should be limited to a maximum of the con-
users already struggling in the current economic sumer price index (CPI) plus 4%.
circumstances. In his presentation, Eskom CFO Calib Cas-
Stakeholders overwhelmingly called for sim urged Nersa to assess Eskom’s costs on their
Nersa to reject its request for a 20.5% tariff hike merits, before deciding on what regulatory levers
from April 1 and to implement a single-digit or policy interventions could be used to offer
increase instead. support to consumers.
Yet Eskom is in desperate need of the hike to “We should not let affordability cloud the
keep South Africa’s lights on and perform criti- merits of Eskom’s application and the efficient
cal maintenance work. Without the increase, it costs should be allowed to be passed on.”
would struggle to operate. Cassim warned that more support would
Eskom warned at the hearings that an infla- indeed be required from government should
tion-linked hike would force it to seek yet more Nersa decide to implement a tariff that is more in
support from the National Treasury line with CPI than the double-digit hike outlined
Eskom is seeking an allowable revenue, in its application.
including outstanding amounts already This would leave no revenue to cover Eskom’s
approved by the regulator, of ZAR293.4bn cost adjustments or the carbon tax, and would
($19.2bn) for 2022/23. hit Eskom’s operations “severely”, leaving debt
If approved, the standard wholesale tariff commitments unmet.
would rise from 133.64c/kWh to 161.04c/kWh, “Eskom would then have to approach the
or by 20.5%. National Treasury for further support to con-
The proposed hike has been overwhelm- tinue operating.”
ing rejected by business, civil society and local Hearings chair Nhlanhla Gumede said
government. Nersa would seek to balance the needs of con-
The executive mayors of both Cape Town sumers with those of Eskom when making its
and Johannesburg, Geordin Hill-Lewis and Dr decision.™

P10 www. NEWSBASE .com Week 04 27•January•2022