ENERGY regulator Nersa has approved an 18.65% increase in electricity prices for 2023 – and a 12.74% hike for next year.
The regulator’s decision relates to the fifth Multi-Year Price Determination (MYPD) for Eskom for year two (2023/24) and year three (2024/25).
The approved increase is lower than what Eskom had applied for but is still significant, and far higher than inflation.
In September 2022, Eskom applied for a 32% price hike for 2023/24, and a 10% hike in 2024/25, equating to a recovery of R351 billion and R381 billion, respectively.
Nersa is allowing Eskom to recover R318 billion for 2023/24 and R352 billion for 2024/25.
According to Nersa the decision was taken against the backdrop of tough economic circumstances, including high interest rates, low growth, high unemployment and load shedding.
In determining the hikes, it tried to balance these various factors as well as Eskom’s service needs, it said.
Presenting the motivation for the approvals, regulator member for electricity, Nhlanhla Gumede, said that the process to determine a fair increase was riddled with issues and problems that needed to be addressed.
“It was a difficult matter,” he said, adding that the regulator was ‘between a rock and hard place’ in determining the grantable increase.
While the determination is based on the regulator’s methodology, the methodology itself is based on the relevant laws, which have various goals. This includes protecting end users, protecting infrastructure, encouraging investment, and promoting equality.
Gumede said a massive issue highlighted by the electricity subcommittee was Eskom’s overuse – or abuse, as some on the committee called it – of its Open Cycle Gas Turbines (OCGT). These turbines are only supposed to be used during peak periods and in emergency situations to keep the grid stable.
Eskom, meanwhile, has been leaning heavily on the OCGTs as a primary power supply.
According to the country’s electricity regulations, the recoveries granted to Eskom are only supposed to be tied to the efficient production of electricity – and there are serious questions about how much of Eskom’s application is linked to inefficiencies.
The other issue raised by the committee is Eskom’s energy availability factor (EAF) which has been declining, with no indication from the power utility about what it is actually doing to resolve this.
The elephant in the room is load shedding. As has been discussed in the past, it’s incredibly difficult to determine how much of the applied-for recoveries relate to Eskom’s own inefficiencies, the subcommittee said.
Asking South African consumers, businesses and other stakeholders to pay for Eskom’s self-inflicted crises is not fair, he said.
“We know that there are issues. Four out of 10 coal units are not working. And it’s not a thing of age – because some of these units are new,” Gumede said.
“Now we have to ask consumers to pay more for these units that don’t work. ”
On top of this, Nersa would be asking consumers to pay more for diesel so that Eskom can use their OCGTs to make up for these inefficiencies.
The issue here, however, is that Nersa may not have the evidence at its disposal to prove to a court where these inefficiencies are placed, and how much of the recoveries are tied to them.
“Can we go to a court and justify that these were self-inflicted emergencies? We may be found wanting. So we are between a rock and a hard place,” Gumede said.
Nersa has in the past rejected Eskom’s applications and granted much smaller increases. These have always been challenged in court, with Nersa losing and having to include higher recoveries in subsequent years.
Business Tech
