Sud Africa : July 15, 2010

The National Energy Regulator of South Africa or NERSA advised earlier this year that applications by those municipalities seeking rate increases above the recommended 19 to 22 percent guidelines would need to provide justification and undertake public hearings prior to approval.

NERSA provided the guideline for the municipalities when announcing its decision on Eskom’s required revenue application for the second multi-year price determination period which runs from 1 April 2010 through 31 March 2013.  Eskom generates electricity for the municipalities who in turn sell to their end-users.

Eskom was granted increases of 24.8 percent for 2010/11, 25.8 percent for 2011/12 and 25.9 percent for 2012/13.  NERSA stated that municipal distributors that implemented a 34 percent increase for 2009/10 have been approved a guideline increase of 15.3 percent from 1 July 2010 which could be followed by increases of 16 and 16.6 percent for 2011/12 and 2012/13 respectively.

On 3 June some 30 proposed municipal increases were considered by NERSA including a 24.6 percent increase by the City of Cape Town, a 25 percent increase by the eThekwini municipality (operating in the Durban region and west coast) and a 28.9 percent increase for the Ekurhuleni region which includes Johannesburg suburbs.  Ekurhuleni has argued its increase is warranted due to the lower and even “negative” increases applied to them in previous years.

While an Eskom bulk buyer would receive an increase of about 8.5c/kWh, the average municipal bulk user faces increases of about 13.5c/kWh or more than a 60 percent higher increase in rand terms than those faced by Eskom’s direct customers.  Should the municipalities be granted increases beyond the recommended guidelines the disparity between Eskom and municipal pricing will grow substantially.  At this time no information regarding the final price increases have been provided however the first billing for July meter readings will indicate how the proceedings went.