Concern over the financial health of South Africa’s state-owned power utility has raised the premium investors demand to hold its debt over that of the nation’s to a record .Electricity power lines and cooling towers are seen at Eskom Holdings Ltd.'s Kendal coal-fired power station in Delmas, South Africa . Photographer: Nadine Hutton/Bloomberg

Johannesburg – Eskom on Tuesday said the National Energy Regulator of South Africa’s (Nersa) decision to hike electricity tariff by only 9.4 percent will have “operational consequences” on the power utility.


In a statement, Eskom’s chief executive Brian Molefe said it will study the details of the reason for its decision once it has received Nersa’s document before commenting on its implications.

“Eskom has noted Nersa’s decision, which yet again doesn’t address the question of Eskom’s continued financial sustainability. In addition, it will have operational consequences,” Molefe said.


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Eskom was reacting to Nersa’s announcement on Tuesday that the energy regulator had decided to approve only a 9.4 percent electricity tariff increase for the power utility for the 2016/2017 financial year effective from 1 April.


Eskom had applied for a 16.6 percent increase and argued that its current deficit, for which the additional tariff revenue was needed, arose from being forced to use expensive fuel for its gas turbines to keep the lights on.

Nersa said it would not grant Eskom the R22.8 billion variance it had requested for the costs incurred in the production of electricity in the 2013/14 financial year.


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Instead, Nersa approved an amount of R11.241 million, which amounts to a 9.4 percent tariff increase for the 2016/17 financial year.

“The recovery of diesel costs is now seriously in question with Nersa’s current decision. We will do our best to minimize the risk of load shedding, striking a balance with Eskom’s already depleted balance sheet,” Molefe said.

The Minister of Public Enterprises will table the municipal increases in Parliament on or before 15 March 2016.