NERSA’S DECISION ON ESKOM’S APPLICATION FOR AN INTERIM PRICE INCREASE

Written by on June 25, 2009 in u

MEDIA STATEMENT
25 JUNE 2009
NERSA’S DECISION ON ESKOM’S APPLICATION FOR AN INTERIM PRICE INCREASE
The National Energy Regulator of South Africa (NERSA) at its meeting held today, Thursday, 25 June
2009, approved an average price increase of 31.3% for Eskom. Eskom had applied to NERSA for an
interim price increase of 34%.
Based on the analysis of Eskom’s application, submissions from stakeholders and the public, the
Energy Regulator further decided as follows:
1. A 31.3% price increase on the average standard tariff is approved from 01 July 2009 to 31 March
2010 (i.e. 9 months). This will result in an increase in the average standard tariff from 25.24c/kWh to
33.14c/kWh.
2. This adjustment will result in estimated standard tariff revenues of R62.031bn from distribution
standard tariff sales of 198 857GWh. The estimated total revenues including Special Pricing
Agreements (SPA) will be R64.704bn for total sales of 222 640GWh which includes international
sales.
3. The 31.3% increase includes the 2c/kWh levy on the sale of electricity generated from nonrenewable
sources (“environmental levy”)1. The 2c/kWh must be recovered within the 31.3% tariff
increase.
4. The approved price increase on the average standard tariffs includes a limited price increase of
15% to both Eskom and municipalities’ poor customers (i.e. Homelight 1 & 2 tariffs). It must be
noted that this is an interim measure until the implementation of inclining block rate tariffs for
protection of the poor. The full implementation will occur in the MYPD2.
5. Eskom is required to extract efficiencies from primary energy and operating expenditure. Other
savings will be derived from lower than previously forecast depreciation due to the delay in the
capital expenditure programme.
6. NERSA will conduct a verification of all costs, and costs determined not to have been efficiently
incurred in line with MYPD rules will be clawed back.

7. Based on the analysis of this application, and previous price applications submitted to NERSA, an
investigation into primary energy costs specifically coal will be undertaken by NERSA to establish
the prudence of the costs.
8. The revaluation of assets and depreciation will be considered in the Multi-Year price Determination
2 (MYPD2) in line with the Electricity Pricing Policy.2
9. Eskom must submit its price increase applications to NERSA six months prior to the required
implementation date of the price increase.
10. NERSA will issue minimum information requirements that will provide clarity on needed information
for tariff applications and act as guidance to the applicant as to the type of information required by
NERSA for tariff determination and decision making.
The full decision by the Energy Regulator and the Reasons for the Decision will be published
on NERSA’s website; www.nersa.org.za in due course.
The Energy Regulator wishes to assure the public and stakeholders that it will continue to carry
out its mandate by facilitating a fair balance between the interests of customers and end users,
licensees, investors in the electricity supply industry and the public.
End.
ISSUED BY THE NATIONAL ENERGY REGULATOR, PRETORIA, 25 JUNE 2009

footnote

1 Announced in the 2008 budget speech by the Minister of Finance. The levy comes into effect on 1
July 2009 (Government Gazette No. 32309 of 09/06/2009).

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