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South Africa will hear on Thursday how much the cost of electricity will rise over the next three years, following Eskom’s application for double-digit hikes.
The National Energy Regulator of South Africa (Nersa) will make the announcement at 13:00 in Pretoria. This follows Eskom’s application in September 2018 for 15% tariff increases every year, from 2019/2020.
The embattled power giant later lowered its sales forecast for the next three years and requested price hikes of 17.1% for 2019/20, 15.4% for 2020/21 and 15.5% for 2021/22.
The large hikes requested by Eskom are far above the 4% consumer price index (CPI) increase in January and the application was largely opposed by business, labour and civil society in written and oral submissions.
Eskom’s performance
Eskom, which has struggled to keep the lights on with bouts of load shedding in November, December and February is set to be unbundled into three separate entities.
Finance Minister Tito Mboweni announced in his February budget speech that the debt-laden power utility would be split into generation, transmission and distribution units. Eskom will receive R23bn from Treasury per annum over the next three years to try to stabilise its finances, currently R420bn in the red.
Nersa confirmed to Fin24 in an emailed response that the planned Eskom restructuring will not affect its decision.
"The allowable revenue can be split into the three businesses. Once the unbundling takes off then the allowed revenues will be split accordingly into the three businesses,' Nersa’s media desk said.
The regulator also said it would consider the recent spate of load shedding and Eskom’s performance and adjust where necessary.
The 2019/2020 increase is on top of the 4.41% hike, approved for the year because of Nersa’s decision last year on Eskom’s Regulatory Clearing Account (RCA) application. The RCA refers to funds Eskom that can recover due to an electricity shortfall or an escalation in operating costs.
The state owned company (SOC) has also filed another RCA application for 2017/2018 and if approved, will see an increase of 2.8% in 2021/2022.
Nersa has previously rejected Eskom’s applications for large tariff hikes. In December 2017, the regulator denied a 9.9% tariff hike application and instead approved only 5.23%.
The power utility has projected a R20bn loss for the financial year end of March, even if Nersa approves the full tariff application.
The Minerals Council of South Africa has warned that if the Eskom tariffs are approved, the mining industry, which is heavily reliant on electricity, will experience heavy losses and 150 000 jobs could be cut.
