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9.4% Eskom hike will have consequences

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The risk of load shedding could increase as a result of energy regulator Nersa’s decision to only give Eskom half of its required tariff increase on Tuesday.

Eskom CEO Brian Molefe said the decision to only approve a 9.4% electricity price increase doesn’t help Eskom’s financial sustainability and “will have operational consequences”.

“We will do our best to minimise the risk of load shedding, striking a balance with Eskom’s already depleted balance sheet,” he said in a statement.

“We note with concern the decision on open cycle gas turbines (OCGTs), which will guide Eskom’s operations in the future in terms of balancing the energy supply and demand in a bid to avoid load shedding,” he  said.

Nersa announced that it would not grant Eskom the R22.8bn variance it requested for the costs incurred in the production of electricity in the 2013/14 financial year. It has instead approved an amount of R11.241bn, which amounts to a 9.4% tariff increase for the 2016/17 financial year.

Molefe said Eskom has reduced its diesel usage in recent months and improved its maintenance plan. “However, we continue to run a constrained grid,” he said.

“OCGTs are part of our emergency portfolio and have been used in the past to avoid or limit load shedding with the understanding that we can recover these costs within the RCA process.

“The recovery of diesel costs is now seriously in question with Nersa’s current decision.”

“We understand the implementation of the regulatory rules in Nersa’s RCA balance decision. The decision on the revenue variance and certain primary energy costs including independent power producers is supported,” said Molefe.

Eskom said that in terms of the Municipal Finance Management Act, the Public Enterprises Minister Lynne Brown will table the municipal increases in Parliament on or before 15 March 2016.

Fin24

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.