LISTEN: Eskom tariff hike may undermine economic recovery efforts

By Staff Reporter Time of article published Mar 8, 2019

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CAPE TOWN – Business Unity South Africa (BUSA) on Thursday expressed concern at the decision by the National Energy Regulator of South Africa (NERSA) to grant Eskom an above-inflation electricity tariff hikes against the backdrop of an economy that was underperforming.


BUSA warned that the cumulative tariff over the next three years might undermine economic recovery efforts, as electricity was a major input cost for business. 

The organisation had warned during the Nersa conducted public hearings into Eskom’s multi-year price determination 4 application, that the economy would not be able to absorb above-inflation electricity increases.

“The unintended consequences of today’s decision may result in a further decline in Eskom’s customer base, as users seek more reliable and cost-effective alternatives, exacerbating the depth spiral,” said Busa in a statement. 

BUSA had also cautioned against the cost of organisational inefficacies at Eskom being passed on to end-users and consumers.

“BUSA has consistently emphasised the need for any tariff adjustments to be considered on the basis of affordability, justifiability and prudence. It also needs to be assessed against any restructuring of Eskom to ensure a fit-for-purpose electricity supply industry,” said BUSA Vice-President Martin Kingston.

BUSA welcomes the further investigations that NERSA has undertaken to perform into prudence, efficiency and performance, as well as the Regulatory Asset Base.

Eskom said it had noted the decision made by the NERSA to approve R206 380 billion, R221 843bn, R233 078bn, which translated to 9.41 percent, 8.1 percent and 5.22 percent price increases for 2019/20 to 2021/22 respectively. 

This excludes the approximately 4.4 percent already approved during 2018 for the Regulatory Clearing Account (RCA) recovery for 2015 to 2017 financial years. On the RCA application for year 5 (2017/18) of MYPD 3, NERSA has approved an amount of R3.869bn.

Calib Cassim, Eskom’s Chief Financial Officer said: “Eskom’s application was fully compliant and based on the current regulatory policy and methodology. The underpinning principle of the application was the need to ensure Eskom’s financial sustainability to enable it to fulfil its mandate to supply electricity to the country. 

“The methodology provides for the recovery of prudent and efficient input costs and as such the amount applied for was driven largely by expenditure on coal, maintenance, and human resources, as well as the cost of servicing the debt raised to finance Eskom’s investment in South Africa’s energy infrastructure.”


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