Eskom, which is R396 billion in debt, blames South Africa’s National Energy Regulator (Nersa) for its financial state and, by extension, inability to do its job efficiently.
Eskom’s financial situation prevents it from providing utility services with its own revenue. Eskom’s chief financial officer, Calib Cassim, has deemed more than R200bn of the utility’s debt as distressed debt, which needs to be paid urgently.
To get its money back from the lenders, Eskom requests rate increases from Nersa. In 2021, the utility requested a 32% rate increase, but was instead granted 18.65%.
In general, Eskom has received less than what it asks for. Last year, Nersa awarded Eskom one of the lowest rate increases to date for 2022-23 at 3.49% after requesting a 20.5% increase from the regulator.
The Eskom app sparked an outcry from the public, business and industry, who condemned it as unaffordable and dangerous to the economy. People also lamented the fact that the utility company asked for a raise when it has shown its inability to keep the lights on.
Announcing the decision, Nersa’s full-time member for electricity, Nhlanhla Gumede, said it had been taken “in the interest of Eskom, the economy and stakeholders.”
Deficit of the municipalities
Every year when the utility requests a rate increase, there is a political uproar against the utility, increasing pressure on the regulator to reject the rate increases. Another major reason for Eskom’s revenue shortfall is the inability of municipalities to pay the 68 billion rand it owes to the power company.
One of Eskom’s main problems is that it has run out of diesel to power open-cycle gas turbines and it has become a constant struggle to find money to buy more.
According to energy expert Chris Yelland, these turbines should only be used in emergency situations to help stabilize the grid. But Eskom has become dependent on turbines as primary generators. They can produce more than 2,000 MW, which can avoid two stages of load shedding.
Political parties and non-governmental organizations have lobbied against the utility and have taken it to court along with the regulator to reverse the decision to approve an 18.65% rate hike, 13.35% less than expected. who had requested the health service.
This is despite political parties previously being in favor of lower rates, which has put the utility in a position where it is in debt and unable to service its plants.
the only open path
Last year, South Africa was in the dark for more than 200 days. Eskom estimates that more than R1 trillion is needed by 2030 to improve its power availability factor and because of this, Eskom plans to stick with Nersa’s decision to approve its 18.65% tariff increase despite political pressure. to reverse the decision.
Answering the questions of the mail and guardianEskom said it would not be intimidated into rejecting the rate increase approved by the power regulator as it urgently needs the funds to recover from debt.
“Nersa allows Eskom to recover costs efficiently. These relate to commitments such as coal contracts, independent power producer contracts, diesel purchases, maintenance implementation, employee contracts, and debt commitments.
“If Eskom does not recover from the consumer, then the burden on the taxpayer increases. So efficient costs will need to be recouped, they don’t just disappear,” the power company said.
He added that the only way open to challenge Nersa’s decision is to file a request with a higher court to review and annul the regulator’s determination.
Those “aggrieved” by the 18.65% rate increase will have to file a court application to challenge the regulator’s decision, Eskom said.
Chairman Cyril Ramaphosa has asked Eskom’s board of directors, according to Eskom chairman Mpho Makwana, to look at how the utility could alleviate the impact of the increase.
“We did not receive an instruction from the president not to implement the increase. That would be negligent, and if we did, we would not be entitled to receive a single penny from the national treasury on budget day,” he said.
Money is urgently needed
On Monday, Eskom’s outgoing chief executive André de Ruyter said the utility needs debt relief combined with rate increases if it is to survive.
“If debt relief isn’t accompanied by tariff reform, then we’ll be back with our handout at the treasury’s doorstep in three to five years.”
South African Local Government Association (SALGA) spokesman Tebogo Mosala said Eskom should have no complaints about the rate increases, because it has received more than the 32% it requested in the next two years.
“The tariff approved by Nersa amounts to a total of 33% increase in the next two years. “Indeed, this is the increase that Eskom requested and it is an increase above inflation,” he said.
Nersa’s decisions on the application of tariffs, however, have an impact on the utility’s bank balance and are the reason why the utility keeps going back to the national treasury for more money. Because, let’s face it, where else is it supposed to come from?
