Eskom has been granted an electricity tariff increase by the National Energy Regulator of South Africa (Nersa) over the next three financial years as way to generate enough funds to escape its current state of financial instability.
The increases for 2019/2020 will be 9.41%, 8.1% for 2020/2021 and 5.22% for 2021/2022. This announcement was made on Thursday, March 8 2019 by Nersa Chair Jacob Modise.
This is estimated to amount to an allowable revenue of R206.38-billion, R221.843-billion and R233.078-billion over the three periods respectively.
The power utility originally applied for a tariff increase of 15% annually for the next three years, but this application was amended in February when Eskom resubmitted for a 17.1% hike for 2019 instead. It also requested a 15.4% hike for 2020, and a 17.5% hike for 2021.
Eskom is currently in the grips of an operational and financial crisis, and has repeatedly highlighted its need for higher revenues. Its electricity sales have continued to decline and it does not make enough revenue from its operations to cover its massive R420-billion debt.
According to Modise, a number of initiatives will be launched by Nersa, including its own independent investigation into how Eskom is governed. This may cause the regulator to adjust its decision based on the outcomes of the probe.
“Our challenge has been and still remains regulating the energy industry in a manner that balances the interests of energy producers on one hand and those of customers on the other. This is never an easy task, for, inevitably, it is influenced by the greater economic environment, both locally and internationally, and as directed by the policy environment of the government,” Modise said.
A number of interventions have been announced in an attempt to turn Eskom’s situation around, including the implementation of a sustainability task-team. A technical review will also be appointed, and President Cyril Ramaphosa recently announced that three of Eskom’s business units will be unbundled.
Nersa’s decision comes on top of another price hike that will kick in next month. Last year, the regulator gave the public power utility approval to claw back revenues through a tariff increase of 4.4%, which will only fall away after four years.