Business elated over Eskom price hike victory

In a massive victory for Nelson Mandela Bay business, the National Energy Regulator of SA (Nersa) yesterday approved a marginal increase of just 2.2% in Eskom’s electricity tariff.

The vastly reduced rate follows a determined fight by business users in the city against the 9.4% price increase granted last year.

“Port Elizabeth carried the banner for the reduced tariff,” excited Nelson Mandela Bay Business Chamber deputy president and energy task team board leader MC Botha said.

He said businesses and residents around the country would benefit from the much lower rate.

The 2.2% increase is in sharp contrast to the 12.7% hike granted in 2015 and last year’s 9.4%.

The moderate increase was a direct result of the August decision by the Gauteng High Court setting aside last year’s increase.

Botha said the business chamber had championed the rights of commerce and industry in the Bay by actively joining the challenge spearheaded by the high-energy-user group in the metro.

“This new tariff structure will benefit the country at large because it will not only result in reduced electricity prices for businesses and homes, but it will also secure thousands of jobs by making industry more competitive and enabling an investor-friendly environment for the economy to grow,” he said.

“Holding government institutions accountable has resulted in a massive win for not only industry, but ordinary electricity users.

“We were the only business organisation [chamber] in the country to take a tough and effective stand against this.”

Botha said consumers would benefit from the reduced electricity price when the new tariff came into effect in July.

Although Eskom could take the decision on appeal in the Supreme Court of Appeal, it was doubtful that it would, he said. “I’m sure this decision will stand.” Nersa confirmed Eskom’s allowable revenue of R205-billion for the last year of the Multi-Year Price Decision (MYPD) period.

MYPD is the process Nersa uses to determine electricity prices over a number of years.

Addressing the media in Pretoria yesterday, Nersa chairman Jacob Modise said the energy regulator had approved an 8% average increase a year for five years, from April 2013 to March next year.

“The reason for the lower percentage increase [this year] is due to the base adjustments made in the preceding years as a result of the approved regulatory clearing account (RCA) balances for Eskom,” he said.

The RCA is a mechanism allowed by Nersa to enable Eskom to recover costs retrospectively after the close of the financial year by raising tariffs the following year.

“You will recall that as a result of the RCA reconciliation, the energy regulator approved 12.7% for 2015-16 and 9.4% for 2016-17, instead of the average increase of 8%,” Modise said.

“The 2.2% increase, taking into account the adjustments already given, maintains the approved allowable revenue for the last year of MYPD3.”

Botha said: “Simply put, the average for the MYPD is 8%.

“Despite winning the court challenge, the tariffs are a set figure.

“As a result, the court allowed for the 9.4% tariff to continue until year end.

“To offset the excess funds, the tariff for the next financial year has been drastically reduced.”

High-energy-user group spokesman David Mertens said the victory demonstrated that business and consumers should exercise their rights when they needed protection.

“We hope the successful challenge will unite business and industry to support efforts that help promote a competitive environment which benefits the economy and the wellbeing of all South Africans,” he said.

“We are relieved that Nersa made the appropriate call and we see this decision as a new beginning for the energy regulator.”