Eskom wants a tariff hike that is above inflation

If Eskom gets its way - South Africans will for the next five years - face electricity tariff increases which will far exceed the inflation rate as the power utility tries to recover R66-billion.

This as the National Energy Regulator of South Africa (Nersa) will host public hearings next week on Eskom’s Regulatory Clearing Account (RCA) application.

The RCA was an allowed balancing mechanism between what was awarded by Nersa on the basis of a forecast in the multiyear price determination and what actually materialised as per Eskom’s audited financial statements for a backward looking reconciliation.

The power utility has proposed an additional two percent increase on top of all upcoming annual increases in the next five years to repay the loans it sourced to fund the shortfall created by lower increases South Africans enjoyed in the three of the last four years.

Eskom’s general manager for regulation Hasha Tlhotlhalemaje  said their application was the “rebasing” for the lower sales achieved over the three multiyear price determination periods for applications for year 2014/15, 2015/16 and year 2016/17.

Tlhotlhalemaje said the projections which have proved to be far from reality left Eskom with massive funding shortfalls due to other unavoidable fixed costs.

Eskom’s argument was that its revenue had been much lower as the initial projected as sales dropped drastically due to a sluggish economy among other reasons.

Nersa’s spokesman Charles Hlebela said: “Due regulatory process will be followed in considering these applications and the Energy Regulator allows only expenditure that has passed the efficiency test.”

In 2016, Eskom’s Regulatory Clearing Account application sought to recover R22-billion while Nersa approved the recovery of R11-billion which led to an increase of 9.4% for the 2016/17 financial year.

On Monday, at the Cape Town International Convention Centre, Nersa will hold the first public hearing on the application before going to Port Elizabeth on Wednesday and Durban on Thursday.

The power utility said as it was faced with declining sales and low revenue, it was forced to source loans amounting to R67-billion from banks to cover the shortfall.

Eskom’s Corporate Specialist Finance, Deon Joubert said as a result, Eskom’s balance sheet sat with loans amounting to R67-billion plus interest.

“The consumer got the benefit of paying a lower amount which Eskom has had to fund through loans which come with interest,” Joubert said.

He added: “Had the estimate (projections used to determine past tariff increases) been right, Eskom wouldn’t be paying interests.”

Consumers were seemingly left with no option but to foot the bill as Eskom tried to recover the shortfall with this publication.

In July next year, Eskom was expected to put another Regulatory Clearing Account application amounting to around R20-billion for the multiyear price determination period of 2017/2018.

Tlhotlhalemaje said their next tariff increases would be informed by much accurate projections as the last multiyear proce determination periods have provided them with valuable lessons.

Nersa will announce its decision on the RCA in June.