Eskom: Thanks Nersa, too bad, so sad for the rest of you

Eskom has welcomed the latest electricity tariff hike approved by the National Energy Regulator of South Africa (Nersa).

On Thursday, Nersa announced that it had greenlit an 18,65% electricity tariff increase for Eskom in the 2023/2024 financial year.

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The regulator further gave Eskom another 12,74% nod for the 2024/2025 financial year.

The hike will see Eskom-supplied customers pay a tariff of R1.73 per kilowatt (kW) in the 2023/24, and will then pay R1.95 per kW in the following financial year.

The increase will become effective from 1 April this year.

‘Tough decision’

In a statement on Friday, Eskom noted and appreciated the “tough decision” made by Nersa to hike electricity price, adding that it “recognises the pressures this determination will place on consumers”.

The power utility said Nersa’s decision, which has angered both South Africans and political parties, would “positively contribute from a financial and sustainability point of view”.

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“The revenue determination of R319 billion and R352 billion for the financial years 2024/2025 will allow a further migration towards a price level that reflects the efficient cost of producing electricity,” Eskom’s Chief Financial Officer (CFO) Calib Cassim said.

Eskom initially applied for a 32% tariff increase in June 2021, amounting to a recovery of R351 billion for the 2023/2024 financial year, and an additional 22.52% for 2024/2025.

The ailing power utility was also looking to recover R381 billion in the following financial year.

Load shedding

Eskom also acknowledged the impact of load shedding on consumers and businesses, with South Africa currently on stage 6.

It said that minimising load shedding was “the highest priority for Eskom”.

“Continuous focus at all levels in the organisation is being given.”

According to Eskom, the continuous load shedding the country has been experiencing was due to Eskom’s lack of performance and unwarranted delays in independent power producer (IPP) projects.

“[This] needs to be addressed,” Eskom said on Friday.

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Earlier on Thursday, Nersa expressed concern on Eskom’s operations saying it was known that the power utility “can’t be efficient”.

The regulator also questioned what would happen if Eskom didn’t meet its energy production targets.

“It will be irresponsible for the power utility to say the plants are not working. These plants need to come back on line. If Eskom fails to run the plants, then they should be capable of correcting the problems they are facing.

“Eskom has to stick to the targets on losses, meaning now the utility has to drop unplanned capacity loss to 20% in 2023/24 and 18% in 2024/25. This is non-negotiable,” Nersa regulator member Nhlanhla Gumede said.

Costs

Meanwhile, Eskom further said it was still awaiting reasons for Nersa’s “reconsidered capital-related costs”.

These costs, the utility said, “significantly” contributed to allowing Eskom to recover costs “related to debt commitments”.

“It is hoped that Nersa has taken the direction given by the courts in previous judgements on related matters and that these have been correctly addressed.”

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Last month, Eskom announced that it managed to reduce its debt and loan accounts from R401.8 billion in 2021, to R396.3 billion – of which municipal debt made up R45 billion – in the latest financial year.

It also suffered a net loss of R12.3 billion after tax despite the power utility’s operating profit improving by 238% to R20.4 billion.

The power utility’ is expected to suffer a net loss of more than R20 billion in 2023, according to outgoing Eskom CEO André de Ruyter.