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Why Nersa granted Eskom 9.4% tariff hike

By News24 1 March 2016

Pretoria - National energy regulator Nersa has given two main reasons for granting Eskom a 9.4% tariff increase for the 2016/17 financial year.

The hike will kick on 1 April.

In terms of sales, Eskom applied for a “regulatory clearing account” (RCA) balance of R11.723bn. The energy regulator allowed R6.175bn. The larger part of this difference is because Eskom did not disaggregate the special pricing agreements and international sales when allocating the approved third Multi-Year Price Determination (MYPD3) revenues to different customer categories, said Nersa.

With regards to other primary energy, the energy regulator has disallowed coal handling and start-up gas and oil. Furthermore, nuclear has been re-phased over the life of the nuclear plant.

With regard to open cycle turbines (OCTG), Eskom applied to recover R8.024bn. The energy regulator has allowed Eskom to recover R1.252bn. The energy regulator has found that Eskom used the OCGTs due to the unavailability of the plant. In this regard, the energy regulator has allowed the excess production from OCGTs at a rate equivalent to the coal price instead of the actual cost of operating the OCGTs.

Eskom submitted an application to Nersa in November last year to recover R22.8bn, which the utility said it used to avert load shedding.

The decision comes after extensive consultation with government, unions, small and intensive users, who engaged in public hearings in six provinces, according to Nersa chairperson Jacob Modise.

Modise said the challenge has been and still is regulating the energy industry in a manner that balances the interests of energy producers on the one hand and consumers on the other.

Nersa evaluated the RCA balance for the first year (2013/14 period) of the MYPD3 amounting to R22.8bn.

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