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Eskom price hike is denied

| Economic factors

Eskom’s selective reopener application to hike the electricity tariff by an extra 9.58%, has been denied.

The National Energy Regulator (Nersa) announced in early May that it had received Eskom’s application for the re-opening of tariff negotiations for 2015/16.

Nersa’s Chairperson Jacob Modise said on Monday (29 June), that higher prices of electricity would result in job losses.

Further, he said that Eskom’s application does not comply with the Municipal Financial Management Act, adding that the power utility must re-submit an application that complies with certain laws, or submit a new one altogether.

Eskom needs R32.9 billion to supplement its generation capacity with open-cycle gas turbines and R19.9 billion for its short-term power-purchasing programme and the impact of the increase in environmental levy.

Eskom “stripped” out the environmental levy from its application because this levy needs to be passed by Parliament first.

Included, the environmental levy would have pushed up tariffs to 24.78%.

Eskom came up against stiff opposition last week, when Nersa held public hearings to debate the need for a further tariff increase.

Experts, business leaders and politicians gave presentations to the Nersa panel, pleading for it to find alternatives to a further tariff increase.

Energy expert Chris Yelland told the panel that the price increase was worse than it seemed and would actually total 31.61%.

“The question of affordability to the economy and to electricity customers has not been considered by Eskom at all,” he said.

However, acting Eskom CEO Brian Molefe painted a gloomy picture if the increase was not implemented.

“If South Africa is not prepared to cough up R15 billion more for diesel, the cost of load shedding will be far higher than that,” he warned.

He and Thava Govender, Eskom group executive for generation, warned South Africa more load shedding was on the cards if the increase was not granted.

Molefe was shocked to discover at the hearings that an increase could only by implemented in 2016, as per correspondence between Eskom and Treasury revealed, unbeknown to the acting chief.

On Monday, Public Enterprises Minister Lynne Brown was quoted as saying that Eskom will have to tap debt markets if it fails to get the tariff increase.

“If Nersa doesn’t give the increase then Eskom will have to re-examine its finances and go out and borrow,” Brown was quoted as saying in the Business Day newspaper.

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