Johannesburg - As the final two days of hearings into Eskom’s proposed tariff increase of 16.6 percent draw closer, Energy Partners, is warning that prices will only stabilise by 2020.
Eskom has asked the National Electricity Regulator of SA (Nersa) to hike power prices by 16.6 percent so it can recoup R22.8 billion in terms of the Regulatory Clearing Account. This amount is from overspent and unearned revenue from customers that dates back some time.
The two final hearings by the regulator are being held on Thursday and Friday.
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Should Eskom be granted its increase, at a time when consumers are under increasing pressure due to interest rate hikes, higher food prices due to the worst drought on record and stubbornly high fuel prices that are a consequence of a high rand, despite the low oil price.
No relief
Energy Partners warns that, should Eskom be awarded the hike, this will be just one “of many exorbitant tariff increases forecasted until 2022”. The energy solutions provider says power hikes will, at the earliest, level out along with inflation - currently at 5.2 percent - in 2022.
Mila Loubser, Head of Energy Reporting at Energy Partners, points out the historical impact on actual domestic tariffs for a typical consumer in residential areas will have increased from R 0.14 per kWh in 1988 to R 2.18 per kWh in 2016 if this latest increase application is approved.
“Our forecast further predicts that the electricity cost for the average South African household will increase from R13 509 per annum to R15 696 in one year’s time, R25 206 in 5 years’ time and R30 360 in 8 years’ time. This will mean a cumulative increase by 93 percent over an eight year period.”
Loubser says an annual increase of around 13 percent is expected up until 2019, after which increases are expected to drop to 8 percent a year. “Our data suggests that the power situation in South Africa will only fully stabilise by 2022 when a reliable energy supply and standard increases can be expected to be established once more.”
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However, she adds the forecast was based on Eskom’s 2015 submission of an application for price increase of 25.3 percent as a selective reopener of Nersa’s third multi-year price determination (MYPD 3).
“This application was rejected in June 2015, due to significantly overstated costs and a lack of credible long-term planning and certainty. In light of this rejection, Eskom will have to borrow funds in order to close the funding gap of R200 billion up to 2018.”
Eskom is currently seeking to stabilise its financial position and is securing long-term bonds worth just more than R100 billion.
IOL