Eskom on new tariffs: We will decide how to address revenue shortfall

Eskom's board will decide how to address the financial shortfall after the National Energy Regulator granted lower electricity tariffs than it applied for over the next three financial years.
 
In a statement on Thursday, the state-owned company said it was also awaiting the reason for the decision by the regulator to disallow R102bn in revenue requested over the next three financial years.

Nersa announced earlier that electricity prices will rise by 9.41% in 2019/2020, 8.1% in 2020/2021 and 5.2% in 2021/2022.
 
The power utility, which is R420bn in debt, applied in September for price hikes of between 15% and 17% in the next financial years.
 
The increases for the next three years are on top of the 4.41% hike approved by Nersa in October, on Eskom's Regulatory Clearing Account (RCA) application. The RCA refers to funds Eskom can recover due to an electricity shortfall or an escalation in operating costs.
 
Eskom will also be allowed to "claw back" R3.86bn from its RCA for 2017/2018, Nersa said, and further details of this will be announced soon.
 
Financial sustainability
 
Calib Cassim, Eskom's chief financial officer, said that the application was fully compliant, and the double-digit hikes were needed to stabilise the debt-laden energy giant.
 
"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," Cassim said.
 
"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 SA’s energy infrastructure."
 
The power utility said the R69bn bailout from National Treasury over the next three years was an important step to restore Eskom's creditworthiness.

'Lapses'

Nersa warned earlier that it could institute a probe of its own into alleged "governance failures" at Eskom and revenue adjustments could be made accordingly.
 
"We take lapses in governance very seriously… the South African public will not be paying for the outcome of the governance lapses," Nersa chairperson Jacob Modise said.
 
Member of Nersa's sub-committee on electricity Nomfundo Maseti said previous criticism by Eskom of the regulator was "unfortunate" and they had to use the standards of efficiency and prudence when weighing up applications for tariff hikes.
 
"The evidence is there; they [Eskom] have said they are not operating in an efficient manner," Maseti said.
 
Modise added that Nersa is an independent institution and there is no political interference in its decision making. He said the regulator applies tariff methodology in a clear, formula-driven process that is open to the public, to determine electricity costs.