NWU expert supports NERSA decision on Eskom tariff application

Pertunia Thulo -- Mon, 07/06/2015 - 12:22

NWU expert supports Nersa decision on Eskom tariff application

"Nersa's decision to reject Eskom's application for an additional tariff increase is absolutely right in present economic circumstances.To have allowed the request would have had serious consequences for inflation, growth and employment," says Prof Raymond Parsons from the North-West University (NWU).

It is the first time Nersa has refused to approve an Eskom application in its entirety.

Leaving aside the technical arguments, the Nersa process once again confirms why it remains essential to have an independent agency, reinforced by outside inputs, to critically interrogate every Eskom tariff application.

While business and consumers may nonetheless have won this particular battle, the 'war' to make Eskom more cost-effective and ensure affordable and predictable electricity must continue to be a collective challenge to Eskom, business and households. Critical factors were raised during the Nersa hearings. The door remains open for Eskom to make a renewed application later and the intervening time must be well-used. Getting Eskom 'right' is not just a tariff question, but also requires addressing key structural issues in the energy market.

The Nersa decision gives breathing space to Eskom and government to also consider other financing options, ranging from increased borrowing on the capital market to taking in a strategic minority shareholder in Eskom. The proper financing of Eskom should not rest on tariffs alone. The recent conversion of the government loan Eskom into equity will hopefully strengthen Eskom's balance sheet in this regard. The rejection of the Eskom application also takes some pressure off the Reserve Bank to increase interest rates in the immediate future because of rising electricity tariffs.

Professor Raymond Parsons, North-West University Business School, Potchefstroom

 

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