Why Nersa cut Eskom price hike

March 04, 2013
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Thembani Bukula, chairman of the National Energy Regulator of SA (Nersa) electricity sub-committee, explained why the regulator cut Eskom’s price hike from the requested 16 percent a year for five years to 8 percent a year.

Returns: Eskom asked for returns of 7.9 percent. Nersa limited this to an average of about 3 percent. That reduces the returns to R137 billion instead of the R185bn Eskom wanted. Nersa said this provided enough to cover the debt and rebuild costs, but reduced Eskom’s retained earnings from the R46bn it wanted to about R10bn.

Depreciation: The depreciation of Eskom’s assets was recalculated. Nersa said Eskom was inflating the value of the assets over the years, but Nersa said that because the assets had been re-evaluated they did not need to be inflated. This reduces the depreciation cost from the R184bn requested to about R139bn.

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eskom oct 23

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