Why SA’s energy regulator Nersa granted Eskom smaller tariff hikes than sought

PRETORIA (Reuters) – South Africa’s energy regulator Nersa on Thursday granted struggling state power firm Eskom average power price increases that were far below what the utility had asked for, saying it aimed to balance the interests of the company and the public.

Nersa decides every few years how much revenue cash-strapped Eskom is allowed to earn from its customers via electricity tariffs, based on forecasts of its power sales and costs.

Nersa said Eskom could hike tariffs by 9.41 percent in the 2019/20 financial year, 8.10 percent in 2020/21 and 5.22 percent in 2021/22.

Those tariff increases do not include previous awards Nersa gave Eskom last year, for costs incurred over 2014/15, 2015/16 and 2016/17, which will be recovered over a four-year period.

Eskom wanted power price increases of 17.1 percent, 15.4 percent and 15.5 percent over the next three years in its latest multi-year price determination application submitted last year.

On Thursday Nersa also allowed Eskom to recover 3.869 billion rand ($270 million) from its customers for electricity supplied in the 2017/18 financial year, significantly below the 21.6 billion rand that Eskom had applied for.

Nersa typically awards Eskom less than it asks for, as it only allows the company to recover costs which it deems prudently incurred.

Eskom supplies more than 90 percent of the power in Africa’s most industrialised economy. But it is grappling with breakdowns at its creaking coal-fired power station fleet which forced it to implement some of the worst power outages in several years last month.

The government has promised to inject 23 billion rand a year into Eskom over the next three years to help the utility meet repayments on its 420 billion rand debt burden.

($1 = 14.3353 rand)

Reporting by Alexander Winning; Editing by Olivia Kumwenda-Mtambo and Emelia Sithole-Matarise