14 September 2017

South Africa: Eskom Welcomes Nersa Decision

Eskom has welcomed Nersa's approval of the consultation process for the power utility's 2018/19 revenue applications.

On Thursday, the power utility said its year-price determination (MYPD 3) cycle comes to an end on 31 March 2018. The National Energy Regulator of South Africa (Nersa) gave its approval for Eskom to submit a revenue application for a single year for the period 1 April 2018 to 31 March 2019.

The power utility is asking Nersa for a 19.9% tariff hike for 2018/19.

"Eskom understands that Nersa, in accordance with its mandate, will evaluate the revenue application and allow for public consultation before making a decision on the allowed revenue. We are committed to participate in Nersa's process and look forward to further engagement on the revenue application with stakeholders," said Eskom's acting Chief Financial Officer Calib Cassim.

The 19.9% average increase translates to a 1 July 2018 local-authority tariff increase of 27.5% to municipalities.

In its revenue application, Eskom said municipalities will continue to pay the 2017/18 rates for the period 1 April 2018 to 30 June 2018. This is due to the Municipal Finance Management Act (MFMA) requiring municipal tariff changes to be made only from 1 July each year.

"Standard tariff revenue has increased by R7 251 million, which equates to revenue increase of 3.6% from Nersa's decision for the 2018/19 year. As the revenue is recouped from a lower sales volume, the overall price increase required is 19.9% for 2018/19," said Eskom in its revenue application for the 2018/19 financial year.

The two major contributors to the price increase are the sales volume rebasing (9.4% price impact) and growth in Independent Power Producers (5.5% price impact).

If approved, the 19.9% tariff of Eskom's allowed revenue would increase by 7%.

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