Eskom price hike will drive up theft and non-payment

Energy expert, Chris Yelland believes that Eskom price increases will reduce electricity sales and drive up theft and non-payment further.

Last week Eskom made an urgent application to energy regulator Nersa to increase the electricity tariff by 25.3% for the 2015/2016 financial year.

This includes the 12.69% price increase that has already been approved by Nersa.

Eskom said it requires cost recovery of R32.9 billion for Open-Cycle Gas Turbines (OCGTs) and R19.9 billion for the Short-Term Power Purchase Programme (STPPP).

Yelland said that a price hike would ultimately  lead to ‘more upward price pressure’.

Eskom’s own theft and non-payment financial problem in Soweto alone is bigger than its non-payment problem with all 20 defaulting municipalities combined.

The township owes the electricity supplier as much as R8 billion. “Some 84% of residents have not been paying their debt. Ideally, you should be having 16% not paying and 84 percent paying,” a spokesperson for Eskom said.

The utility company has therefore been trying to install prepaid meters, but has faced rioting and outcry from community members, some of who have claimed to have never paid for electricity, according to reports.

“One thing we learned from e-tolls: Eskom cannot ram unaffordable tariffs down people’s throats using hi-tech so-called solutions,” said Yelland.

“Prepayment meters not panacea for revenue protection and collection. Electricity theft takes place before the meter or by bypassing the meter,” the analyst warned.

Electricity theft also takes place via the vending systems and IT infrastructure, he added.

Nersa said in its statement issued on Friday that the energy regulator is considering Eskom’s price application, taking into consideration the urgent need to stabilise the electricity network to avoid a possible total blackout and Eskom’s operational and financial challenges.

Nomura’s emerging markets economist Peter Attard Montalto, said that following discussions with the public and private sector, he believes Eskom will get an equity injection in June, adding that lower tariff awards are likely.

However, Montalto said that a 25% tariff increase will not be applied this year.

“Something has happened in the background that has put this on the back burner. It is possible that political backing from the National Treasury has dissipated.”

However, what is set to happen, said Montalto is a second regulatory clearing account award (RCA), which may take the total electricity price increase this year to around 19% from 12.69% with the first RCA award.

“This will be welcome as it will clearly help get more cash into Eskom, where liquidity levels are lower than they would like, but is not as much as is needed.”

Reporting with News24 Wire.

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Eskom price hike will drive up theft and non-payment