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Eskom given go ahead to increase electricity prices to recover R13 billion loss

The National Energy Regulator of South Africa (NERSA) has given Eskom the go-ahead to make tariff changes. NERSA says the struggling power utility can recover just over R13 billion it lost last year. They took the decision after analysing the difference between Eskom's uncontrollable costs, its actual costs and revenues for last year. Eskom applied for NERSA to approve recovering of their R27 billion loss but the energy regulator has only approved R13 billion. This comes after Eskom recently blamed the energy regulator for using the lockdown as an excuse to delay dealing with the outstanding matters between the two entities, including the application for this outcome. NERSA also says it needed to balance the interests of both Eskom and the public. These tariff increases to recoup the lost money will only reflect in the coming years and will not reflect this year. However, this year Eskom will still go ahead with their yearly tariff increases.

In an interview with SABC News, Nhanhla Gumede, of NERSA said the process to draw up an implementation plan to recover the tariffs is to start immediately. Even though the conversations with the licensee and the consumers of the electricity will begin, the actual plan might only be developed by July. The current Eskom wholesale tariff from NERSA is about R0,85/KWh. This is not the price that the consumer gets because the municipalities will add their own charges on top. Gumede added that the Eskom Retail Plan will start from around R1.29/KWh. This is such a high price for the consumer to carry in a time where many South Africans are losing jobs, many are not working and there is no income. To make matters worse, the country like any other part of the world is dealing with the Coronavirus and is under a nationwide Level 4 lockdown which sees many industries closed. Gumede admitted that the current electricity prices need a review because they are not good for both Eskom and the consumer. In light of that, NERSA is beginning conversations with Eskom and the different consumers of electricity.

In February, The energy regulator conducted public hearings in almost all of South Africa's provinces which were meant to give all electricty stakeholders an opportunity to give their input into the tariffs that are sought by Eskom. Gumede said despite these public hearings, there is a challenge in disproving some costs that Eskom presents as a real cost. As long as they are unable to prove why that cost should not be legitimately recognized the regulator is forced to incorporate that cost into the pricing. He added all stakeholder comments are actually taken into account and reviewed and they are then taken account of in the pricing to the extent which they can be incorporated. The energy regulator went on to say that they will be starting a conversation with Eskom as early as Thursday to resolve outstanding cases then possibly take them to court. One of the cases is the 3 year R69 million cash injection by treasury which Eskom says is a bailout but NERSA considered it as a tariff subsidy.

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Eskom NERSA National Energy Regulator of South Africa

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