Eskom tariff increase on the cards

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Eskom CEO Brian Dames

 

Johannesburg - Eskom's application for tariff increases had been ready for submission when government asked it to look at additional factors, the parastatal said on Wednesday.

“We were ready, it was 100 percent in line with regulation. We engaged since February with hundreds and hundreds of stakeholders,” Eskom finance director Paul O'Flaherty said.

“At the end, Eskom had its submission ready, but we have been asked to look at two additional things.”

O'Flaherty was speaking at a meeting between the parastatal and the SA Chamber of Commerce and Industry in Johannesburg.

The first factor Eskom was asked to consider was whether there would be any new power stations built after the Kusile plant, in Mpumalanga, was completed in 2018/19.

The second was whether independent power producers could serve a bigger role in furthering energy programmes.

O'Flaherty said it was too late to expect a nuclear programme in 2023, and it was too late to expect that there would be 500

megawatts of new coal-fired power in 2014.

“So, the question is there on what needs to be included (in the submission),” he said.

“My expectation... is that we get clear direction (on the two issues) this week. If we get it this week, we should be able to complete it by the end of this month, or the first week of October.”

The application for the multi-year pricing determination three (MYPD3) was meant to be submitted to the National Energy Regulator of SA on Friday.

It proposes a five-year growth path for tariff increases starting from April 1.

O'Flaherty said he could not provide figures on what the increase would be, because the application still had to be submitted.

“We can say that it would be double digit (figures) over five years, on average.”

He said the MYPD3 period would ensure that Eskom remained financially stable and independent.

“With MYPD3 we have to be very certain that we (also) understand coal. We have four billion tons of coal that are required from now until the end of the lives of our coal stations,” he said.

Coal needed to be allocated to Eskom at an affordable price for it to keep tariffs down.

“At the moment it is 50 percent of our operating costs, and if we can't get that strategic resource allocated to Eskom at the affordable rate, the consumer... will have to pay for it.”

O'Flaherty said Eskom's debt in March stood at R185 billion, and would grow to nearly R320 billion over the next three years.

This meant it would accumulate an interest bill of R24 billion on average over the next six years.

“What is scary is that debt goes out until 2042,” he said.

“What is very important is that Eskom must look at this every single day and make sure that we operate and maintain our assets... so that we can produce the cash flow to pay back this debt.”

He said the parastatal was only starting to get back to the financial levels it had before the economic recession in 2008.

“We expected sales this year to grow by three percent, but we are only seeing a less then one percent growth.

“Last year we sold electricity on average at 50 cents per kilowatt hour.

“This year, on average, it is about 60 cents. That number, to be cost-reflective today, needs to be 90 cents.”

He said Eskom was also trying to reduce its own usage of electricity.

“We have done some interesting stuff in terms of solar panels. We have invested in them in (head office) Megawatt Park... and we are attempting to effectively run it off-the-grid,” O'Flaherty said.

“We are encouraging Eskom to save. Some of the electricity we generate we (eventually) use ourselves. What the solar panels are about, is us saying, 'Eskom, stop using your own product'.” - Sapa


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