Blog: Energy regulator Nersa explains 18.65% electricity tariff increase – CapeTalk 567

Thilivhali Nthakheni, a financial regulation expert at Nersa, talks with Mike Wills about why the increase was made.

Nersa announced that it would be granting Eskom permission to increase electricity tariffs by 18.65% for the upcoming 2023/2024 period.

@ lelemezzadri/123rf.com
@ lelemezzadri/123rf.com

The role of the regulator is to balance the interests of both the customers and the licensees, and in this case, the licensee is Eskom.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

He says that the increase in tariffs is based on Eskom’s application to increase its allowable revenue by R334 billion. After that, Nersa made adjustments that led to a percentage increase in tariffs.

Nthakeni adds that Eskom’s original application would have resulted in an increase of 32%.

In how we get to the amount that we had approved, there are adjustments that we have made to that amount of R334 billion which in terms of their application, it was sitting at 32%

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

He explains that according to Nersa’s methodology, the regulator assessed Eskom’s revenue-generating assets and made adjustments to their evaluations.

What the methodology requires is that only the assets that are aiding to generate the capacity should be allowed to earn the return.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

We also have operating costs, which the methodology requires us to adjust those costs by inflation.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

Other factors, such as depreciation and Eskom’s IDP, play a role, according to Thilivhali.

He states that Nersa decreased the amount requested by Eskom’s application, which results in the current value of the tariff increase.

He adds that the needs of customer is taken into account in the ‘balancing act’ of increasing prices to sustain the utility while maintaining affordability for customers.

To achieve the balancing act is not only looking at the affordability of the customer, but in this case that was considered when we arrived at 18 percent. To say this is what can sustain Eskom and this what the customer can at least be able to pay instead of 32 percent.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

He states that Eskom also attempted to include the outstanding debt that cannot be collected from municipalities, but the regulator chose to omit it because it believes that it should not be attributed to the paying customers.

Eskom initially had a line item that deals with the area debt, the debt that they are not able to collect, and we agreed that we are not going to entertain that because that is not the fault that can be passed through to those who are paying.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

Nthakeni says that the outstanding debt should be dealt with by the utility or the municipalities, who bear the responsibility of recovering lost revenue.

They need to follow up that money and recover it.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

Nersa also reduced Eskom’s projected budget for diesel. Thilivhali explains that it is an inefficient and expensive method of generation that should only be used in emergency situations.

We sent a message to the utility to say: Be efficient, do proper maintenance, don’t rely on a very expensive source of energy. Rather do proper maintenance and supply at a least cost option than the most expensive.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

Thilivhali explains that Nersa is on the lookout for irregular expenditure and does not allow the charging of expenses that cannot be justified.

We look at what are the expenses that relate to what we call irregular expenditure, and we have in the past disallowed those expenses when we become aware of it.

Thilivhali Nthakeni, Acting Head of Department of Electricity Pricing Tariffs at NERSA

Nersa presents its decision on price tariff increases as a balancing act of maintaining affordability for the customer and ensuring continued functionality of the utility.

Scroll up to listen to the interview

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s