Unlikely Eskom will get 19.9% increase‚ says energy analyst

05 June 2017 - 21:40
By Naledi Shange
Eskom was allowed to increase the price of electricity by 440% between 2008 and 2016-17.
Image: MARK WESSELS Eskom was allowed to increase the price of electricity by 440% between 2008 and 2016-17.

It was very unlikely that Eskom would get the 19.9% electricity tariff hike which it was reportedly seeking.

This is according to energy analyst‚ Chris Yelland.

“Generally Eskom’s requests are overly optimistic but Nersa has in the past always knocked them down to reality‚” said Yelland.

Moneyweb reported earlier on Monday that the proposed increase was disclosed in a confidential draft tariff application for 2018/19 that Eskom submitted for comment to National Treasury and local government association Salga.

Treasury and Salga respond to the draft but the final decision on the hike lies with the National Energy Regulator of SA (Nersa). Nersa makes its decision after public hearings where it explores the repercussions of the proposed increase. The regulator also looks into Eskom’s non-compliance in expenditure.

Yelland said a huge hurdle Eskom would need to address with Nersa is the numerous reports which have highlighted Eskom’s alleged incompliance.

One of the latest was the PricewaterhouseCoopers (PwC) report into the business relationship between Eskom and Gupta-owned coal supplier‚ Tegeta.

“All of these scandals will be factors which will be argued by many people who will address Eskom’s irregular expenditure.

But if Eskom were to be granted an almost 20% electricity hike‚ the impact would be “severe”‚ says Yelland.

Municipalities which already owe Eskom large sums of money would be plunged into even more debt.

One such municipality is the Emalahleni municipality in Mpumalanga. In February‚ Eskom implemented massive power cuts in the city after the municipality failed to settle its R1-billion debt.

Yelland said Eskom could also expect a spike in theft and non-payment from its consumers should they be granted the increase.

“When people cannot afford something‚ they will make a plan to bypass the system‚” he said.

Businesses would also be severely affected.

“We would see a lot of marginal businesses needing to close their doors and that would in turn lead to high volumes of unemployment‚” said Yelland.

“In terms of trade... The price of exports would be affected and South Africa would become less competitive.”

Meanwhile‚ the power utility has refused to confirm or deny whether it is indeed seeking the exorbitant increase.

Eskom spokesperson Khulu Phasiwe said he could not comment on an abstract figure‚ saying they were yet to take into consideration the input from Salga and Treasury before making their official application for the increase to Nersa.

But Phasiwe said whatever figure they requested would be justified.

“In the current financial year‚ Eskom had an increase of 2.2% and this is way below inflation. The tariff increase which we are asking for next year will be linked to inflation‚” he said.

Eskom’s latest tariff increase request comes fresh on the heels of the saga involving its former CEO‚ Brian Molefe‚ who was meant to have received R30-million in an early retirement payout after serving only about 18 months in his post.

The payout was‚ however‚ halted by Public Works Minister Lynne Brown.

Phasiwe‚ however‚ said the tariff increase had no ties to Molefe.

“While people may try to lump this together‚ the increase has nothing to do with Brian Molefe. The tariff increase is something that would have happened regardless of Molefe‚” Phasiwe said.