Debt still crippling Eskom
ELECTRICITY: NEED FOR ‘TARIFF HIKE TO COVER COSTS’ Demand unlikely to recover to pre-Covid levels due to the economic recession.
Eskom has blamed a myriad issues for its escalating debt, including funds owed by municipalities and customers now standing at R32.9 billion, up from R25.1 billion in September 2019. It says 48 municipalities in the country accounted for more than R100 million owed, each, by 30 September.
It added the tariff increases granted to it by the National Energy Regulator of SA (Nersa) were insufficient to cover its costs.
Eskom chief executive André de Ruyter said yesterday that the power utility requires a gradual 25% tariff increase to adequately cover its costs.
For the six months to September, Eskom’s sales volumes fell 10.3% to R108.7 billion, as a result of the lockdown. This is despite a 8.76% tariff increase granted to it by Nersa over the period.
Demand is unlikely to recover to pre-Covid-19 levels due to the economic recession. Sales are expected to be 15.7TWh lower than the prior-year and are likely to stagnate at 190TWh for the next few years, said Eskom.
De Ruyter said implementing the required “cost-effective” tariffs would not result in exorbitantly high electricity prices because measured against other developing and developed markets, SA’s electricity prices would remain competitive. SA would still be in the lower third of average global tariffs, he said.
“If one converts the South African electricity tariffs to US dollars…the real cost of electricity in South Africa measured in US dollars since 2011 has not kept up with US inflation…”
He added that this conversion is important because SA is a net exporter of commodities to US-dollar dominated markets.
As at 30 September, Eskom had secured funding of R19.6 billion, or 48% of the funding requirements of R40.7 billion, for the 2021 financial year.
Government has provided a further R6 billion in support, with the remainder from the R56 billion committed by government expected by year-end.
In the absence of tariff increases, however, Eskom said the government support will assist in servicing debt and improving liquidity but is inadequate to reduce “the principal debt and therefore, will not ensure Eskom’s long-term financial viability”.