Picture: REUTERS
Picture: REUTERS

The energy regulator will allow power utility Eskom to claw back R31.1bn from consumers through a 4.41% electricity price hike over the next four years.

The hike is over and above another tariff application — yet to be decided on — wherein Eskom has requested the regulator to hike tariffs 15% for the next three years, energy analyst Chris Yelland noted.

"What it really means is that, come April 1 next year [2019], we are going to have a mighty price increase," he said.

On Tuesday the National Energy Regulator of SA announced it had approved the liquidation of Eskom’s third multiyear price determination regulatory clearing account, meaning the utility may now retrospectively recover costs it had incurred over the past three years that had not been assumed or budgeted for.

The 4.41% increase will come into effect in April 2019, allowing R31.1bn to be recovered from standard customers over the next four years, after which the hike will fall away.

In the same way, R1.58m more will be recovered from negotiated price agreements and international customers, the regulator said.

The recovery is significantly less than the R66.6bn Eskom originally asked for, but the 4.41% price hike will still add to mounting cost pressures such as higher food and petrol prices for households.

The utility, SA’s largest state-owned company, has been at the centre of state capture allegations in recent years and plagued by poor governance.

A new management team was installed by President Cyril Ramaphosa in February to clean up the institution, but it was nevertheless unable to escape a net loss of R2.3bn for the year to end-March.

Eskom is expected to remain under financial pressure as electricity sales stagnate and it continues to incur cost overruns in completing its long-delayed Medupi and Kusile coal-fired power stations.

Meanwhile, it is also facing dire coal shortages.

Ten of its 15 baseload stations have less than three weeks’ coal left, reportedly because suppliers are not meeting their contractual output.

These suppliers are companies that were owned by the politically connected Gupta family and placed under business rescue in February after banks closed their accounts.

It is yet to be seen what tariff increase the regulator will allow Eskom, although in recent years it has generally given the utility half, or less than half, of what it applied for, Yelland said.

"Eskom is saying they have done the sums and they need 15%," he said.

"If it says it can’t afford to carry on without it, it needs to look at its business model."

The utility’s management is in the process of formulating a new strategy that Eskom has said will be presented to the board in November.

steynl@businesslive.co.za

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