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Eskom tariff hikes: Is there light at the end of the tunnel?

Mar 07 2019 09:11
Tehillah Niselow and Lameez Omarjee

The National Energy Regulator of South Africa (Nersa) will on Thursday announce the price of electricity for the next three years after Eskom applied for price hikes of between 15% and 17%. 

Nersa’s decision will have to juggle Eskom’s precarious finances and load shedding alongside the various oral and written submissions from business, labour and civil society opposing the tariff hikes.

Eskom is projecting a R20bn loss for year end March and expects further losses in 2019/2020 even if the full tariff hike application is granted.
 
The power utility is R420bn in debt and cannot service its loans from its current revenue. The National Treasury announced major restructuring plans in February and a R23bn lifeline for the power utility per annum for the next three years.
 
The Minerals Council of South Africa has warned of 150 000 job losses in the energy-intensive mining industry if the 15%-17% price hike application is granted.
 
Inflation has averaged between 4%-6% during between 2012 and 2018, while Eskom has consistently requested double-digit price increases
 
This is how the energy regulator weighed Eskom's request for tariff hikes previously:

 
2012/ 2013
 
Eskom requested 25.9% price hikes from the regulator. Instead, Nersa granted a 16% average increases to electricity costs.
 
2013/2014- 2017/2018
 
Eskom applied for a Multi-Year Price Determination (MYPD) of average increases of 13%, plus 3% to support the entry of new independent power producers, a total of 16%
 
The power utility said then that prices did not cover the full costs of supplying electricity and asked for a five-year approval to its application to provide financial certainty.
 
Nersa instead granted Eskom an average 8% increase.
 
2018/2019
 
Eskom requested a 19.9% increase for the financial year and was granted 5.23% hikes by Nersa instead.
 
The power utility said this decision would affect its financial stability.
 
The price hikes approved today are not the only aspect affecting electricity costs. Nersa has granted a 'claw-back' to Eskom in the form of the Regulatory Clearing Account (RCA) application. The RCA refers to funds the energy utility can recover due to an electricity shortfall or an escalation in operating costs.

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 RCA application.
 
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  |  eskom  |  sa economy  |  energy  |  tariff hikes
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