Paul Burkhardt

Eskom did not recover R7.8 billion of spending it had incurred from 2010 to last year, the National Energy Regulator of SA (Nersa), said yesterday.

Eskom had in August last year asked that it be allowed to get back R18.4bn.

Nersa, which last year said the power utility could raise fees by an average of 8 percent in each of the five years through to March 2018, did not say by how much more tariffs would increase.

“There will definitely be a tariff adjustment next year,” Charles Hlebela, a spokesman for Nersa, said.

For Eskom to recover the R7.8bn, prices would have to increase by a further two percentage points to five percentage points, he said. The final increase had yet to be determined, Hlebela said.

Eskom is struggling to supply sufficient power and is building new plants after years of under-investment in generation. Its primary energy costs, mostly coal, rose at rates of 23 percent to 31 percent in each of the three years to 2013 and were R60.7bn last year, exceeding the regulator’s projections by 34 percent, according to Bloomberg calculations.

The utility uses coal for about 85 percent of electricity, and has been running more expensive, diesel-fuelled open-cycle gas turbines to meet demand.

“Eskom welcomes the decision regarding a balance in its favour,” the utility said.

It was not yet able to determine the effect of the decision on specific customer categories because the regulator still had to decide how the company would liquidate the balance on the so-called regulatory clearing account.

Eskom, which received half the 16 percent price increase it had requested for the five years through to March 2018, is seeking to plug a R225bn cashflow shortfall for the period.

“This is the first step before tariff increases are authorised by Nersa,” Peter Attard Montalto, an emerging markets economist at Nomura International, said.

Standard & Poor’s (S&P) cut the utility’s rating to one notch above junk on June 13.

A week later, it placed Eskom on negative CreditWatch, meaning that it had a 50 percent chance of being lowered again within 90 days. S&P will announce the outcome of its review next month. – Bloomberg