Justifying 20% hike for Eskom

REVENUE: LESS CASH BECAUSE DEMAND DROPS

Utility will be sustainable in seven years if Nersa grants tariff increase it’s asking for.

Eskom should achieve financial sustainability in seven years but that was conditional on the National Energy Regulator of SA (Nersa) agreeing to tariff increases of about 20%, the utility’s chief financial officer said yesterday.

“We believe we should be able to navigate Eskom to the point where it is financially sustainable,” Anoj Singh told a select parliamentary committee on communications and public enterprises. “It should happen in the next seven odd years but that will depend on the tariff increases.”

Singh did not dispute leaked reports that Eskom has applied to Nersa for tariff increases of 19.9% for private consumers and 27.3% for bulk-buying municipalities from July 2018.

He qualified it by pointing out that Eskom did not know at this stage what percentage Nersa would approve.

On the sidelines of the briefing, he said the tariff application had in part been determined by the fact that price hikes over the past five years had been premised on increased demand and consumption, which did not materialise.

This meant that Eskom did not earn the revenue it had expected.

The company expected demand to increase somewhat over the medium term but wanted the new increases to be informed by the fact that it had missed out on revenue in the previous cycle because demand flattened.

The tariff increase for the current financial year was 2.2%. – ANA