Electricity tariff increase shock in store for Nelson Mandela Bay residents

OCTOBER 1, 2014

Nelson Mandela Bay residents could be in for a shock with a higher electricity tariff increase coming into effect from July 1 next year than the 7.39% announced by the municipality and approved by the National Energy Regulator of South Africa (NERSA).

Moneyweb has reported that NERSA has agreed to allow Eskom to collect an additional R7.8 billion over one year.

This means that municipal customers will pay more from July 1 next year “after the increase in the bulk purchase price has been factored into retail tariffs”.

NERSA has allowed Eskom to collect the additional R7.8 billion in revenue after it was agreed that the power parastatal had under-recovered this amount in the tariff period 2010/11 to 2012/13.

The amount of R7.8 billion was reached after a reconciliation was done of the Eskom Regulatory Clearing Account (RCA) “a mechanism that tracks Eskom’s actual income against projections.

“If it deviates due to factors outside Eskom’s control, tariffs may be adjusted.”

The reconciliation would result either in Eskom being compensated of consumers for under-recovery or over-recovery.

Moneyweb said the implementation of the increase over one year in-stead of two or three was aimed “at improving Eskom’s sustainability”.

Among the items listed by Eskom that resulted in the under-recovery was the price of coal and of fuel for the Open Cycle Gas Turbines over which it has no control.

The higher tariff increase is likely to have an impact on the metro.

As it will make the price of electricity less affordable it could result in a higher defaulter rate and the municipality not reaching its target collection rate of 94%, a fact as CFO Trevor Harper has said, that could influence NMB’s financial sustainability. - MetroMinutes.