The City of Cape Town has condemned the decision by the National Energy Regulator of South Africa (NERSA) to approve higher electricity tariff increases for Eskom, warning that consumers are being unfairly burdened, reports Cape {town} Etc.
According to the City, NERSA approved an increase in Eskom’s permitted tariff hikes from the originally proposed 5-6% to almost 9% annually for the next two years, following a calculation error identified in Eskom’s initial tariff application.
However, the City said the regulator should have scrapped the increase entirely and initiated a full reassessment of Eskom’s multi-year price determination instead.
‘Instead of rubber-stamping this additional Eskom tariff hike, NERSA should have completed a full, error-free assessment of Eskom’s financials,’ said City’s MMC for Energy Alderman Xanthea Limberg.
She added that Eskom’s current financial position did not justify the higher increase.
‘It is now public knowledge that Eskom is in a better financial position than forecasted to NERSA, based on actual interim Eskom financial results. In fact, Eskom is already generating substantial profits even under the lower originally approved tariffs,’ said Limberg.
‘This is strong evidence that the public is being unfairly burdened with this extra Eskom hike – over 50% higher than originally permitted.’
City raises concerns over Eskom application
The City said its formal submission opposing the hike highlighted multiple concerns beyond the calculation error acknowledged by NERSA, including the regulator’s failure to take asset depreciation into account.
According to the City, Eskom’s tariff application may also contain incorrect financial performance forecasts and outdated asset valuations, which should have triggered a full review process.
‘Eskom’s improved financial performance can only be rationally explained by a combination of higher electricity sales or lower operational costs than what was forecasted to NERSA,’ Limberg added.
‘This required nothing less than a full reassessment of the Multi-Year Price Determination.’
Limberg said the City is now assessing its legal options following what it described as NERSA’s ‘rubber stamping’ of the additional Eskom increase.
Under Section 15(1) of the Energy Regulation Act, Eskom is not permitted to generate excessive margins of electricity sales or pass the costs of inefficient operations on to consumers.
‘Cape Town’s position remains that NERSA should have scrapped this additional hike in favour of a full redo of Eskom’s price application to ensure fairness and accuracy,’ concluded Limberg.
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