'Eskom gravy train will continue‚' says former exec

Power utility Eskom wants to recover its losses by increasing tariffs by 30% before the end of the year.

This is according to former senior Eskom executive Ted Blom‚ from Mining and Energy Advisory.

“The public will merely continue funding the Eskom gravy train and the effects will compound over time. Eventually‚ exchange rates will be affected as excessive electricity costs make South Africa increasingly uncompetitive to the point where exports will cease.”

Blom said municipalities also want to increase the price of power by 5% “with some adding more than the recommended 6.84% suggested by Nersa”.

Blom said Eskom wants to do this by using loopholes in the National Energy Regulator of South Africa (Nersa) Multi-Year Price Determination (MYPD) rules.

Nersa invited public comment on Eskom’s request to increase tariffs to recover R66bn lost between 2014 and 2017 due to an “over-estimation of electricity sales and overspend on coal‚ gas and imports from 2014 to 2016”. The closing date for public comment is Friday.

Blom said Eskom would effectively never run at a loss because it recovered shortfalls via an annual Regulatory Clearing Account (RCA) application.

The government describes the RCA as a “monitoring and tracking mechanism that compares certain uncontrollable costs and revenues assumed in the MYPD decision (made by Nersa) to actual costs and revenues incurred by Eskom”.

According to Blom‚ Eskom recovered “shortfalls in projections by increasing consumer’s tariffs the following year. This increase is over and above annual tariff increases”.

He added: “Traditionally‚ once these RCA increases are added to electricity tariffs and the funds recovered‚ prices are not readjusted back to normal. This practice then resumes the following year as Eskom once again overestimates their sales.”

Blom said Eskom still showed a bottom line profit of over R20 billion before the RCA claims from 2013 to 2016. Here is a breakdown of their finances:

2014 - R5.183bn net profit (+R10bn RCA) 2015 - R7.089bn net profit (+R19.18bn RCA) 2016 - R3.6bn net profit (+R23.6bn RCA) 2017 - R4.617bn net profit (+R23.8bn RCA)