Eskom’s R250 billion headache

 ·31 Jan 2025

Eskom’s latest tariff increases were far below what the state-owned enterprise wanted, leaving a gap of close to R250 billion from what it says it needs.

Yesterday, 31 January 2025, the national energy regulator NERSA approved a 12.7% increase for Eskom’s tariffs in 2025, which will come into effect from 1 April 2025.

This is well above inflation, currently at 3%, averaging 4.5% in 2024.

NERSA also approved a 5.36% tariff hike for 2026 and 6.19% for 2027.

Nevertheless, the increases were far below what Eskom had wanted, which sought an effective 66% tariff hike over the period.

For 2025, NERSA cut Eskom’s application by 65%.

Roy Havemann from the Bureau for Economic Research said that the tariff increases applied for by Eskom, while still hefty, will be a positive for inflation and consumers and a blow for Eskom.

Havemann said that it leaves a gap of R246.6 billion in income between what Eskom says it needs and what the regulator says it needs.

“This does not necessarily translate into a shortfall, as Eskom usually applies for more than it needs,” said Havemann.

“We need a new tariff methodology that better balances the need for affordability with the need to protect Eskom’s bottom line. Eskom will likely take this decision on review.”

Source: BER

Eskom also released its interim financial results for the six months leading up to 30 September 2024

It reported an overall profit of R17.8 billion before adjustments and R16.1 billion after.

Nevertheless, this was only due to a R21.5 billion profit from the transmission division. Generation lost R4.3 billion and distribution lost R857 million.

“These results are unsurprising but go to the heart of why Eskom is fighting against the complete unbundling of the entity – transmission is the natural monopoly and, over time, will be the ‘crown jewel’ of the group,” said Havemann.

Although Eskom made billions of profit, it is crucial to not overstate the figures.

Over the same period last year, Eskom made a profit of R2 billion amidst higher electricity sales and the related value-added tax impact during the winter months.

However, the utility would make a R55 billion loss by the end of the financial year.

The Auditor General (AG) also recently briefed the Portfolio Committee on Electricity and Energy, stating that Eskom continued to submit financial statements with serious issues.

The AG said that there were material misstatements in multiple account balances and disclosures.

It also found that the significant internal control deficiencies that resulted in negative audit outcomes for at least the previous five years were not addressed by the group’s accounting authority.

The AG also further noted serious flaws with prepaid meters, which have resulted in the inability to determine the full extent of illicit prepaid tokens created.

“Simply put, weak financial management at Eskom persists. Ongoing improvements to governance, including ensuring that prepaid meters are not open to fraud, will improve financial performance,” said Havemann.

Eskom lost 13.9 terawatt-hours (TWh) of electricity due to theft, which led to a revenue loss of around R23 billion.

Show comments
Subscribe to our daily newsletter