Regulator holds Eskom's annual increase down to low 2,5%

Posted On Friday, 17 October 2003 02:00 Published by eProp Commercial Property News
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The National Electricity Regulator (NER) yesterday approved an average price increase of 2,5% for Eskom with effect from January 2004, the lowest tariff hike in four years.

Collin Matjila eskomThe below-inflation price increase comes as a relief to consumers who are still recovering from an 8,4% price increase implemented at the beginning of the year. The low tariff means that electricity prices for next year will continue to rise, but at a much lower rate.

The NER said its decision was based on a number of factors, which included scrutiny of Eskom's budgets for next year, audited financial statements for last year, and the returns the company requires to meet customers' future needs.

NER chairman Collin Matjila said: "A key determinant of the 2,5% price increase is the fact that Eskom will be required to repay customers for returns earned in 2002 .

"These excess returns were earned mainly because Eskom sold more electricity than expected when price increases for 2002 were approved," he said.

"Eskom's allowed revenues for 2004 have been adjusted downwards accordingly."

The regulator said the decision toward a lower price increase was also based on achieving certain key objectives in terms of its mandate.

These include keeping electricity affordable by putting pressure on Eskom's costs, providing the power company with a reasonable rate of return so that it could sustain its current activities , and ensuring the sustainability of the industry by providing a conducive environment to attract new investment.

The NER said the price increase, which it described as "relatively generous", was expected to give Eskom a 4,9% increase in its revenues in 2004.

Xolani Mkhwanazi, NER CE, said Eskom had requested an 8,5% price increase based on its planned future capital expenditure.

Eskom had said its forecast capital expenditure for the next five years would be about R50bn. This included upgrading transmission lines and the recommissioning of mothballed power stations.

Eskom's surplus capacity is anticipated to run out by 2007.



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