NERSA's decision on Eskom's Revenue Application for the Third Multi-Year Price Determination period 2013/14 to 2017/18

The National Energy Regulator of South Africa (NERSA) at its meeting held today, Thursday, 28 February 2013, approved an 8% average increase per annum for the next five years. The average electricity price will increase to 65.51c/Kwh in 2013/14 up to 89.13c/kWh in 2018. The total revenue approved for the five years amounts to R906 553 million. On 18 October 2012, NERSA received Eskom's Revenue Application for the Third Multi-Year Price Determination, referred to as MYPD3. The application covers a five-year period from 01 April 2013 to 31 March 2018.

Eskom applied for an annual price increase of 16% over the MYPD3 period. The requested price increase translates into required revenues of over R1 trillion over the MYPD3 period. The MYPD3 application also includes Eskom's proposals to restructure its retail tariffs. The retail tariffs are the tariff rates applicable to the various customer categories, namely urban, rural, residential and local authorities. In considering Eskom's MYPD3 application, the Energy Regulator followed the due process, which included the following:

• Publishing Eskom's price increase application on the NERSA website.
• Inviting written comments from stakeholders and the public.
• Conducting information sharing sessions. The purpose of these sessions was to share information on Eskom's MYPD3 application with stakeholders and the general public, as well as to provide them with a platform to interrogate the application.
• Conducting public hearings in all nine provinces.

Approximately 200 written stakeholder comments were received. A total of 162 oral representations were made during the public hearings conducted in the nine provinces. Based on the available information received, after duly considering the application, written submissions, oral representations, reasons, facts and evidence provided, the Energy Regulator approved as follows:

1. The allowed revenues, standard average prices and percentage price increases are approved for the period 01 April 2013 to 31 March 2018 (control period) as detailed in Table 1 below:

2. The allowed revenues to be used to recover Eskom's costs, as detailed in Table 2 below:

3. The retail tariff structural adjustments are approved for implementation on 01 April 2013 as follows:

3.1 The residential tariff structures are approved for implementation as per Table 3 below:

3.2 The increase on the Homelight 20A customers consuming up to 350kWh/month (the Block 1) will be limited to Consumer Price Index (CPI ) of 5.6%. The increase on the Homelight 20A customers consuming more than 350kWh/month will be 7.6% (CPI + plus 2%).

3.3 All other residential customers' (Homelight 60A and Homepower) electricity tariffs will increase by an average of 8.0%.

3.4 Eskom must ensure that:

3.4.1 The Time-of-Use off-peak to peak demand is adjusted to a ratio of 1:8.

3.4.2 All tariff cross-subsidies (received and paid) must be shown transparently. These subsidies are related to affordability subsidies, low voltage subsidies and historic electrification and network subsidies found in large power urban tariffs.

3.4.3 The Use-of-System charges must be based on the cost per voltage level for all large power customers. Where there are low-voltage subsidies, these must be transparently shown as a low-voltage subsidy charge.

3.4.4 The reliability and service charge covering the cost of providing ancillary services which is currently embedded in the energy charge must be unbundled (i.e. shown separately) for the large power tariffs.

3.4.5 The environmental levy charge must be included into the energy charge component of the tariff and not shown separately.

3.5 Eskom must ensure that alternate tariff options (other than Time-of-Use tariffs) are available to municipalities with a predominantly residential load mix.

Statement issued by Mr Charles Hlebela, HOD: Communication and Stakeholder Management, National Energy Regulator of South Africa, February 28 2013

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