Page 5 - AfrElecl Week 30

AfrElec COMMENTARY AfrElec

($1.25bn) for the 2019 financial year, previously
blamed the regulator’s lower tariff adjustments current threat that the country’s economy is
for its revenue shortfall. facing. This case was not merely a case between
Indeed, NERSA has already approved Eskom Eskom and NERSA, but rather a case of Eskom
application to recover ZAR13.3bn ($805mn) as versus the South African economy and electric-
part of the power utility’s regulatory clearing ity consumers,” NERSA said in a statement.
account (RCA) application for 2018/19.
Tariffs
Reaction The decision means that Eskom can now raise
Eskom welcomed the ruling this week, saying it tariffs by way above the rate of inflation.
allowed the utility to “migrate towards a solution “South Africans will be paying a lot more
where it could become more self-sufficient” and for electricity in the years ahead. We’re beyond
recover efficient costs, ultimately reducing its the tipping point. Consumers choose alterna-
dependence on government for further equity tive options and each year the utility sells less,”
support. warned Anton Eberhard, Professor Emeritus at
Improving the company’s financial perfor- Cape Town University.
mance and raising revenues is a key component In tariff terms, the ruling could add 10% to
of the company’s reform plans, which are being power bills, warned Chris Yelland, managing
driven by CEO Andre de Ruyter. director of EE Business Intelligence.
Eskom chief financial officer Calib Cassim “Whatever was going to be the price increase
said the judgment was “very encouraging”. for the next three years is going to be an extra
“It aids in instilling confidence in the regula- 10% added on to that. So it was already decided
tory regime within the country, by ensuring that that from April 1 next year it was going to be a
the NERSA methodology is adhered to,” he said. 5.3% increase, so an extra 10% will make that a
However, Eskom did acknowledge that 15.3% increase,” he told CapeTalk radio.
higher tariffs would prove difficult for many There may well be more legal action in future
customers. over Eskom’s subsidies and tariffs. The challenge
“Eskom has been participating, under for Eskom is to raise income at a time when it is
the leadership of the Department of Mineral highly regulated by the government.
Resources and Energy, in proposals where cer- The current reform plans aim to introduce
tain vulnerable economic sectors would be con- more competition into the generating and sup-
sidered for targeted support,” Eskom said. ply sector, with the additions of IPPs and new,
NERSA itself warned that the decision could alternative suppliers.
cause economic problems across industry. Hanging over this is Eskom’s ZAR440bn
“The judgement, if left uncontested, will ($29bn) debt, which gives it little financial room
not only disrupt the industry, but will further for manoeuvre, and leaves it beholden to the gov-
suppress economic recovery, considering the ernment for bailouts to keep the lights on.™

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