Nersa mulls Eskom’s tariff plea

Eskom CEO Phakamani Hadebe made a desperate plea for higher Eskom tariffs over the next three years on Monday, as well as for more money from the state, while apologising to SA for the mess the utility is in.

Hadebe was speaking in Cape Town at public hearings held by the National Energy Regulator of SA (Nersa) to interrogate Eskom’s application for a 15% tariff increase beginning in 2019-2020. The application needs Nersa’s approval.

Eskom is in a dire financial state, with a R419bn debt it is unable to service from the revenue it earns. It costs more for it to generate electricity than it recoups from tariffs due to a high cost base, which Nersa believes should not be made the burden of the public.

“I am the first to acknowledge that Eskom has contributed to its own problems. Eskom is compelled to apologise to SA for having brought these challenges. They could have been avoided. But they have built over time and the turnaround will take time. For that we apologise,” he said.

Hadebe was appointed a year ago to turn Eskom around. To do so, he says, will require a mix of higher tariffs, more financial support from the state and cost reductions. He pledged Eskom would save R150bn in costs in five years but added this would not be sufficient.

In December Eskom chair Jabu Mabuza said the company would approach the state for R100bn in debt relief, by taking some of its debt onto its own balance sheet.

CFO Calib Cassim said Eskom was in a debt trap, borrowing to cover debt service costs. Debt costs are expected to grow to R600bn over five years.

Recovery needs a mix of higher tariffs, more financial support from state and cost reductions