NEWS
05/03/2018 09:21 SAST | Updated 05/03/2018 09:35 SAST

Eskom Won't Be Allowed More Steep Tariff Hikes

The National Energy Regulator of SA has warned power utility Eskom that it will not be open to steep tariff increases in the future.

Siphiwe Sibeko / Reuters

The National Energy Regulator of SA (Nersa) has warned power utility Eskom that it will not be open to steep tariff increases in the future.

Nersa also urged that Eskom to look at shutting down inefficient power stations while cutting its headcount and capital spending to lower its expenses, Business Day reported on Monday.

Siphiwe Sibeko / Reuters

Nersa granted Eskom a 5.2 per cent tariff increase for 2018-19 instead of the 19.9 per cent increment that Eskom had applied for. Nersa has published the reasons for its decisions on its website and it gives an indication of the mismanagement as it paints a picture of the company's inefficiency and inaccuracy in its forecasting.

Eskom's five-year multilayer price determination from Nersa expires on March the 31st and the power utility was suppose to submit another five-year determination which is to be submitted late 2018, however, it asked for one-year interim tariff increase.

Eskom has also put in a regulatory clearing account which totals R60b to recover from its lower-than-expected sales and higher-than-expected costs. Nersa's stern response to the one-year suggest it will be less forgiving of the company clearing account details.

Mike Hutchings / Reuters

Eskom's tariff challenges have contributed to its liquidity it faced in the 2016/17 financial period. The installation of a new board and acting CEO in February has aided the company as raised R20bn in short-term credit.

Analysts have cautioned Eskom that it may need a thorough reconstructing of its business model if it is to be sustainable with the Nersa warning of a "utility death spiral".