Eskom wants to raise electricity prices

 ·15 Jan 2015

Crisis-hit Eskom says that it needs to raise tariffs in order to assist the company in recovering some of its operating costs.

In a quarterly ‘state of the system’ update at Megawatt Park, in Johannesburg on Thursday, Eskom chief executive Tshediso Matona said that the company’s operational strain has put stress on its books.

Matona noted that the company has been forced to use diesel to run its its open cycle gas turbines, at an estimated monthly cost exceeding R1 billion.

“That has put our financial health under stress,” he said, pointing out that there were also other drivers affecting its financial position.

Eskom has approached government for a reported R20 billion bailout to pay for its diesel bill over the short term.

Matona also highlighted a trend of reduced sales and increased debt, while cost overruns were also a factor, namely the delayed Medupi power station in Limpopo province.

Eskom said on Thursday that its debtors book was R24 billion (ended September 2014), “which hasn’t changed significantly since our last official results,” according to acting finance director, Caroline Henry.

Henry added that R8 billion is overdue while R6 billion is made up of money owed by Soweto and Municipalities.

Thava Govender, Eskom generation group executive said that Eskom’s total debt in the first week of January 2015, is at ‘around’ R23 billion, but the overdue debt is R15 billion. The Municipal debt was at approximately R4.7 billion, with Soweto’s debt at R8 billion.

“We don’t have the right tariff – in that it does not allow us to recover all our cost,” Matona said.

“Our business model does not allow that to happen. There is an acceptance that going forward, we need to address that issue.”

Consumers will be hit with a 12.69% electricity tariff hike in April this year, the National Energy Regulator of SA (Nersa) announced in October 2014.

That increase is 4.7% above the 8% tariff increase originally agreed to for the year to March 2016.

In 2013, Nersa said that Eskom could only raise tariffs 8% a year for the five years to 2018, instead of 16% requested by the power utility.

However, the regulator noted that Eskom’s costs exceeded projections for the three years to 2013, enabling the company impose higher tariffs.

Matona said that the processes for what funds government will make available to support Eskom “are under way”.

“It’s a comprehensive set of interventions, the top of which…is money for the gap up till the end of March, which is in the region of R3 billion. That still remains on the table,” Matona said.

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We’re in a financial crisis: Eskom

Eskom’s interim profits plunge

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