South Africa’s state electricity utility Eskom has been in the news for months, owing to its seemingly unending financial crisis. In the country’s budget for 2022, there’s no provision for a bailout as South Africa continues to figure out a way out of its debt, inflation and unemployment crises. Nevertheless, Eskom applied to the National Electricity Regulator of South Africa for a 20.50% increase in the price of electricity, which was slashed by the regulator. Instead, NERSA granted the body a 9.61% for this financial year, less than half of what it asked for. Eskom’s argument in all of this is that the regulator has not allowed it to recoup sufficient revenue through tariffs over a number of years, which is why it has relied on government bailouts in time past. On Business Edge for Wednesday, Tolulope Adeleru-Balogun looks at the approval received by Eskom from NERSA to hike the electricity price in South Africa and its expected impact. She’s joined by Ted Blom, Advisor of Mining and Energy from Johannesburg.
The issue of Eskom’s insolvency has long been public and it seeking for the 20.50% increase in tariff it says, is consequent upon its inability to redeem the funds due to it as a result of purchases from independent power producers as well as the carbon tax, both of which is outside of the company’s operations. These alone make up for 13.8% of the original increase it sought. Ted Blom calls the conundrum confusing. “I’m at a loss,” he said, “to explain how Eskom has not been able to trim its budget. Every year (barring one year of the COVID19 pandemic, they’ve increased that way above the inflation rate; and Eskom’s costs are tied to the South African economy,” he said. This means Eskom should have been able to survive on its own, without bailouts or controversy when it’s not allowed to raise prices at will. The NERSA – Eskom price dispute has often ended up in court, and it has again.
While Eskom appears displeased with the NERSA ruling, Ted Blom says it’s misdirected anger as the regulator has always taken sides with the utility company over consumers. “It has failed in its charge to balance the needs of the consumers with that of Eskom. In fact, NERSA has always looked after Eskom [‘s interests].
The full episode of Business Edge is above.
