Tariff hike decision: Experts believe Eskom won't get what they want

Eskom's latest attempt to score themselves a cash injection faces its own personal D-Day in a showdown with The National Energy Regulator of South Africa (Nersa) on Thursday. The regulatory body will announce their decision on whether they will allow the firm to implement a 15 17% tariff hike over the next three years.

Many South Africans have scoffed at the idea that Eskom deserves to take any more money from the general public. While they crank the prices up, customers are still subject to uncertain periods of load shedding and chronic mismanagement which still persists at the top.

How much debt Eskom is in However, the utility will be looking to turn this weakness into a strength. The failures also serve as reasons to grant their requests for increased tariffs, as they attempt to plug a monstrous debt hole of R419 billion.

Ted Blom is a senior energy analyst and has been monitoring the Eskom omnishambles since the turn of the century. He expects that Nersa will stand firm in the face of the energy supplier's pleas, by refusing to grant them any tariff increase at all. Blom suggests that Eskom already have ways of making more money, without ripping off the consumer.

I strongly feel that Nersa will not agree to Eskom's demands for a tariff hike. When they held their Cape Town hearings, I explained that their generation plants simply do not add up to what's in their budget.

They've got units offline and there is all sorts of nonsense happening at Eskom. If they want to generate cash, they should switch off their renewable features. That could save them R50 billion alone.

Ted Blom Nersa hearings: What we can expect Blom also believes that current Chief Financial Officer Calib Cassim should be the next person called to the state capture inquiry. He believes the executive has just as many skeletons in his closet as Anoj Singh after the CFO blasted Nersa's inability to conduct a fair process . Yeah, that'll get them onside, Calib.

Fellow energy expert Chris Yelland doesn't think it'll be all that bleak for Eskom, but he does predict they'll fall short of the 15 17% they are seeking. He argues that Nersa has a history of resisting Eskom to a certain extent, and believes that will be on show this Thursday:

I think they will get the tariff hike, but it won't be the amount they are asking for. Nersa very rarely give in to everything Eskom demand. They have to decide whether the costs are viable and if there will be a return on investment and capital. They also need to decide what can be recovered through a tariff hike on its own.

Chris Yelland Other ways Eskom can make some money Yelland explained that Eskom is seeking increased rates of 17% of the original figure for the first year, before reducing it to 16% and 15% over the next two years respectively. We asked the energy guru what else Eskom could do to raise the money, and got a very pragmatic response:

There are four ways for a company to finance a business. The customer is the first port of call (so, things like tariff hikes). Then you must look at shareholders, who are already involved with a R69 billion bailout. Borrowing is the third option, with the final one being cost-cutting.

The truth is, Eskom have to tighten their belts. They should look at staff retrenchments, cut back on their expenditure and get rid of non-core assets like the Eskom Finance Company. Only a combination of all four can save them.

Chris Yelland

NERSA will be making their announcement on the proposed Eskom tariff hikes at 13:00 on Thursday 7 March.

Tags: energyEskomNersaSouth Africa

LINK:	https://www.thesouthafrican.com/eskom-tariff-hike-predictions-nersa/...
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