Wide rejection of Eskom’s request of a revised 56% tariff increase

Reading Time: 3 minutes

Eskom has come under intense pressure this week as one stakeholder after another submitted proposals to the National Energy Regulator of South Africa (Nersa) on why Eskom should be denied further tariff hikes.

Eskom is asking Nersa to grant it a revised 56% tariff increase over the next three years.

Business organisations, civil societies, municipalities, unions and various industry leaders have urged Nersa to reconsider it’s increase proposal. They say the tariff increases will have a huge negative impact on the economy and consumer spending.

Many groups have strongly opposed the application saying the increases are too steep and will stagnate the economy further. However, Eskom says its financial problems are far from over and is in a dire state.

The power utility explained to the Nersa’s board that they are using one credit card to pay another and their financial situation remains a challenge.

Eskom Spokesperson Khulu Phasiwe says that many believe that Eskom is too bloated and needs to cut down jobs.

“We have submitted our application to the regulator and by the end of this month, the regulator will wrap up their decision and on the first of March, they will make their decision. Majority of the stakeholders are not happy with the adjustments that we are asking for. Clearly, there is lots of scope for us to adjust our efficiencies and also to cut costs which is where we are headed at the moment. Many presenters have said Eskom is bloated and Eskom needs to cut jobs.”

Eskom says it will make a net loss of R20 billion for the 2018/19 financial year. It expects a further R19 billion loss in the following financial year.

“We are only going to make some profit possibly in the fourth year and our projections are if we get a good tariff adjustment we are likely to have a profit by then of about R14 billion. But the next three years are the period of very tough financial situation.”

Anton Van Dalsen of the Helen Suzman Foundation believes Eskom has not made a strong case for further tariff hikes.

Meanwhile, Business Leadership South Africa, labour unions and City Power have also strongly opposed the increases. BUSA has highlighted that the power utility’s electricity prices have increased by 613% over the last 15 years.

BUSA further adds the increases, if approved in its current form, would constrain investment and would contribute to stagnant economic growth, and significant job losses.

Nersa will make its final decision in March.