Eskom seeks 25% tariff hike - TechCentral

Eskom seeks 25% tariff hike

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Eskom’s electricity tariffs may increase by 25,3% from 1 April for its direct customers and 1 July for municipal customers if an application to the national regulator is approved.

The increase has the full support of government’s war room.

It is aimed at paying Eskom’s diesel bill in order to avoid load shedding and to extend and conclude short-term agreements to buy electricity from other producers (short-term power purchase programme, or STPPPs), including companies such as Sasol and Sappi as well as municipal generators like City Power. It also makes provision for the increased environmental levy announced by finance minister Nhlanhla Nene during his budget speech.

News of the application came after the City of Cape Town issued a statement on Thursday night in which it expressed its concern that many customers won’t be able to pay the huge increase. The city also apologised to its customers for having to table a draft budget next week that reflects electricity tariffs that may increase further if the Eskom application is approved.

Moneyweb reported in February that Eskom may be applying for a re-opener, but neither Nersa nor Eskom would respond to questions at the time.

Eskom is now asking for a selective re-opener of the tariff determination that was earlier granted for the five years from 1 April 2013 to 31 March 2018. An annual tariff increase of 8% was then granted. The increase for 2015/2016 was later increased to 12,69% to compensate Eskom for under-recovery in the previous tariff period.

If the new application is granted, it would apply to the remaining three years of MYPD3. It would see tariffs increase by 25,3% in 2015/2016, drop by 3,24% in 2016/2017 and increase by 7,26% in 2017/2018. These are the total proposed increases, including those granted earlier.

Eskom says in a submission to the local government association Salga and national treasury dated 16 March that government won’t give any further equity injections over and above the promised R20bn that will be paid over in the new financial year.

It says credit downgrades have seen it at the limit of any significant borrowings and even if there was appetite among financiers, the cost would be too high.

Downgrade
The news also broke on Thursday that Standard & Poor’s has downgraded Eskom to “junk” status, a mere four months after Moody’s did the same.

Eskom further states that it is on a drive to save between R50bn and R60bn over five years and has reprioritised capital spending, bringing the total down from R337bn to R300bn.

It says a full re-opener of the MYPD3 tariff determination would take 12 to 18 months and therefore the war room suggested a selective re-opener.

The basis for the re-opener is that Eskom assumed in its MYPD3 application that Medupi, Kusile and Ingula projects would have delivered power and therefore no provision was made for the extensive use of its diesel-gobbling open-cycle gas turbines and STPPPs.

Following the deterioration of its generation fleet, the explosion at its Duvha plant, the collapse of the coal silo at Majuba, issues with coal quality and delays in the completion of the new build programme, the use of the gas turbines and STPPPs are the only way to keep the lights on.

Eskom says the war room took the decision that it should continue to use these measures, because the cost of power interruptions to the economy is even higher than the additional costs incurred for diesel purchases and STPPPs.

The utility asks for an additional R32,9bn for diesel and R19,9 bn for STPPPs over the next three years.

Eskom acknowledges that submitting the application this late means it would not be able to comply with provisions of the Municipal Finance Management Act to table proposed bulk tariff increases to municipalities in parliament before 15 March.

It says it would have to obtain special permission from the minister of finance for late submission.

It asks for the cooperation of local government stakeholders to enable implementation on 1 July, but says if that cannot be achieved, implementation on 1 September should be considered.

As the City of Cape Town indicated, the municipal budget cycle is far advanced and all the municipalities countrywide would have to revise their budgets as soon as there is finality regarding Eskom’s application.

  • Download the Submission of proposed price increase document here
  • This article was republished from Moneyweb with permission

16 Comments

  1. Mike Sick n' Tired on

    So now once again the South African People have to bail out another ANC success story….in conjunction to absurdly high fuel prices, personal tax increases not to mention ridiculously high broadband prices….when will we stand together to stop the fat-cat corruption?

  2. Agreed… enough already! Seriously why should we be penalised for the huge “shortfall” in funds. I want to know again… “where’s the money?”

  3. This is an OUTRAGE! Eskom is burning expensive diesel which should be an EMERGENCY measure only and the SA customers have to pay for this AA and BEE INCOMPETENCE!
    I’m also reliably told by FF MP’s that there is ..wait for it….CORRUPTION taking place in the supply of that diesel. WE ARE BEING OVERCHARGED by ANC cronies! ( prime evil lurks in this ANC cabal that’s for sure)
    This burning of this expensive fuel is beyond incompetent, it’s flat out criminal negligence. South Africa is sitting right on top of the world’s third largest coal reserves and we are using IMPORTED LIQUID FUELS to keep the lights on?
    How 50m people sit idly by while being raped by this gang of ANC crooks, cronies and general bunglers is a source of constant wonder to me.
    Could Ms. Slabbert or the editor of TechCentral please let us Paying Peasants know exactly who is who in this so-called War Room and how does J6P get a couple of choice emails through to these ANC War Room parasites/mandarins. Is there transparency at work or the usual ANC cover up?
    I will await the answer by Monday or Tuesday….Truly, this Eskom pricing lunacy must be stopped before they totally decimate our industrial civilization with insane off-the-cuff tariff increases!

  4. 25%? My salary does not go up nearly close enough to absorb this!

    Pushing people off the grid. I wish I could leave too.

  5. Africa_Failed_by_own_Fathers on

    Let’s see how Eskom and the leadership are fooling us :
    1. They Never performed, BUT got bonuses. They NEVER maintained equipment, falsely submitted “junk” profits that never were, and the Board collided to give Executive bonuses, which surely they share in a certain way.
    2. They keep on sponsoring activities for which they want the people to pay the money, and we have NO clues of how it will benefit us back !!! … this is ROBERY….
    3. They are failing BASIC accounting, bookkeeping procedures and making Eskom to be the Cash Cow of individuals and closed circles… and we have to pay….

    THE PEOPLE SHALL MARCH AND REBEL AGAINST THIS, THIS IS THE ONLY WAY. WE NEED TO ORGANISE MARCHES AND BOYCOTTS LIKE THE ONE AGAINST E-TOLL, AND I EXPECT AILING COSATU TO BE ON THE SIDE OF THE PEOPLE, TO PRONOUNCE ITSELF AGAINST THIS EXPLOITATION !!! AMAAAAANNNNDDDDDLLLLLLLLLLAAAAAAAAAA !!!!! ….

  6. I agree with you, we should voice our concerns, but the public at large are too apathetic! We need a Wayne Duvenage to drive this!

  7. The municipal tariff will likely increase around 35-40% – don’t forget the 25% is the increase to municipalities who will apply their fat profits to the new cost. As for gas and solar, well, everyone will climb on the band wagon too. You can rest assured gas, gas bottles, gas appliances and solar products will also increase 25%!

  8. You know that LPG is about 30-35% cheaper in Lesotho. Although I believe they have their own filling plants, they will definitely import the bulk gas from the SA refineries. Petrol is also considerably cheaper in neighbouring countries, about R 1.50 to R 2, because of lower taxes.

  9. To please you even more : on this last Sunday morning between 8h30 and 9 AM, Donwald Pressly, a business reporter for Business Report (Independent Media) previously and now with News 24 and other media agencies, revealed on SAFM that Eskom pays their BEE suppliers of diesel R 17/L.
    They must be the wholesales run by a dentist and a beauty therapist, as revealed recently by the Sunday Times.

  10. These breakfasts are sponsored by Telkom, Eskom and the SABC. So buying power from Eskom, having a Telkom line, and paying your TV license all contribute to The New Age and the Guptas.

  11. To please yourself even more, I can guarantee you that the ANC will be assured of a big win in Gauteng come 2016 despite this outright ANC cronies, Idi Amin-style grand larceny at Eskom.
    Hlaudi, Gwede, Faith plus Jesse Duarte will be pumping out the usual Josef Goebbels bollocks about Apartheid, three hundred years of oppression and more fatuous ANC ‘Good Story’ BS than you can shake a ballot paper at. Of course I expect my local ANC executive mayor here in Ekurhuleni (God how we have regressed) to write off a further R2bn or so unpaid Eskom bills owed by my local squatter camps! Us racist white ratepayers will of course end up making good on that R2bn!
    Not to mention the fact that the so-called ‘Independent’ Electoral Commission is going to be headed up by a Zumanaut of NOTE.
    So, do you now think I can claim back my money from that financial planner of mine who told me how GREEEAAAT the future was going to be?

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