APPROVED: ELECTRICITY HIKE IN APRIL BUT ...

The Chief Executive Officer of ESERA, Vusumuzi Mkhumane, flanked by the General Manager Finance Sabelo Dube (L) and the Regulations Manager Simphiwe Khumalo.

MBABANE – As of April 1, 2020, consumers will pay six cents more for each electricity unit.

That is if the Eswatini Electricity Company (EEC) implements the maximum percentage allowed by Eswatini Energy Regulatory Authority (ESERA).
This increment came after a breather of about a year for consumers as in 2018, Cabinet, led by the Prime Minister, Ambrose Mandvulo Dlamini, suspended tariff increments.

Yesterday afternoon, the Chief Executive Officer of ESERA, Vusumuzi Mkhumane, announced that his organisation had approved the request by EEC for tariff increment for the financial years of 2020/21 and 2021/22.

The average increments approved by the regulator (ESERA) were 1.03 per cent and 1.05 per cent, respectively. With this approval, Mkhumane said in an effort to balance the approved revenue requirement, EEC shall be allowed to adjust the tariffs within a range of 2.5 percentage points above and below average of the approved tariff increase for each year.

Requested

In essence, this means that from the 6.2 per cent tarrif hike EEC had requested for domestic users, it was allowed to increase the tariff by a minimum of 1.03 per cent.
If the utility is to implement the minimum permitted by ESERA, a domestic user shall pay E1.77 per unit. This is equivalent to a two cents increment. If EEC implements the minimum, the consumer shall get 56.6 units for E100. This is equivalent to losing half a unit as for the same amount, households currently get 57.2 units.

However, if EEC implements the maximum percentage in the upcoming financial year, which is 3.53 per cent, (1.03 per cent+2.5 per cent), each unit shall cost E1.81.
Using the tentative estimate of the maximum increment, the consumer will get 55.3 kilowatts per hour (kWh) for E100, which is a decline of 1.9 kWh.
EEC’s application sent to ESERA in November 1, 2019, was for an average tariff increase of 5.70 per cent for each of the next two financial years 2020/21 and 2021/22.

In the proposed increment that was sought by the utility, a 6.2 per cent increase was for domestic customers while 5 per cent and 5.5 per cent was for small commercial (non time of use) and time of use customers, respectively.

The electricity provider had based its request on a revenue requirement of E2.391 billion in 2020/21 and E2.793 billion in 2021/22.
Announcing the approval of the aforementioned tariff increment, Mkhumane said: “In coming up with the decision on the current tariff levels, ESERA considered the need for the utility to implement projects geared towards local generation to reduce overreliance on imports and projects aimed at improving the efficiency and reliability of electricity services.”

He said the regulator also considered the rate of return of 7.92 per cent for EEC to meet the cost of raising capital and the need for the utility to improve efficiency levels as well as implement cost-cutting measures while anticipating growth in customer numbers in the next two financial years.
In a quest to attain the public sentiments and also get their input during the review period, Mkhumane said the regulator engaged various stakeholders in all the regions of the country and put together their views and concerns.

Impact

He also said they considered the Eskom tariff escalation of 13.06 per cent and 10.16 per cent for both the years 2020/21 and 2021/22, respectively which had a significant impact on EEC cost of sales.
Eskom supplies EEC with about 80 per cent of its electricity import.

Mkhumane said: “Based on the  approved 2016/17, 2017/18 and 2018/19 reconciliation adjustments, EEC made an under-recovery of E107.34 million, over-recovery of E182.795 million, an over-recovery of E279.629 million, respectively in the allowed revenues. The total over- recovery amounts to E277.543 million for the three years.”

The ESERA CEO said the over-recovery amount of E277.543 million from the last three financial years shall be ploughed back into the sector to benefit consumers over the next two financial years.

Given these facts, the CEO said: “Having duly considered the tariff application, taking into consideration the written and oral submissions from various consumer groups and stakeholders, as well as facts and evidence provided by EEC, the ESERA Board met on January 24, 2020 and approved that EEC be allowed a revenue requirement of E2.296 billion for the financial year 2020/21 and E2.549 billion for the financial year 2021/22.”

He said in an effort to balance the approved revenue requirement, EEC would be allowed to adjust the tariffs within a range of 2.5 percentage points above and below average of the approved tariff increase for each year.
Mkhumane informed journalists from the electronic and print media that each increase shall be implemented with effect from April 1, of each year.

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