Home Southern Africa Eskom CEO: tariff hike needed to cover costs

Eskom CEO: tariff hike needed to cover costs

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·         Eskom has been unable to rein in its R463.7 billion (up from R454.2 billion in September 2019) debt burden, despite increased tariffs and continued government support

·          Eskom CFO Calib Cassim told  that the power utility spends R2 billion each week on debt-service commitments

·         The sales are likely to stagnate at 190 TWh for the next few years

·         Implementing the required “cost-effective” tariffs would not result in exorbitantly high electricity prices

Eskom has been unable to rein in its R463.7 billion (up from R454.2 billion in September 2019) debt burden, despite increased tariffs and continued government support. Eskom CFO Calib Cassim told  that the power utility spends R2 billion each week on debt-service commitments.

Eskom has blamed several issues for its escalating debt.  Funds owed by municipalities and customers now standing at R32.9 billion, up from R25.1 billion in September 2019.  Forty-eight municipalities in the country accounted for more than R100 million owed, each, by September 30, 2020.

The power utility underscored that minimal tariff increases granted to it by the National Energy Regulator are insufficient to cover its costs and has pitched for a gradual 25% tariff increase to adequately cover its costs.

Eskom’s sales volumes fell 10.3% to R108.7 billion, since March this year  despite a 8.76% tariff increase granted to it by Nersa over the period. Since demand is unlikely to recover to pre-Covid-19 levels due to the economic recession,  Sales are expected to be 15.7 TWh lower than the prior-year.   The sales are likely to stagnate at 190 TWh for the next few years. Implementing the required “cost-effective” tariffs would not result in exorbitantly high electricity prices.  Measured against other developing and developed markets, South Africa’s electricity prices would remain competitive. South Africa would still be in the lower third of average global tariffs, he said. If one converts the South African electricity tariffs to US dollars.  The real cost of electricity in South Africa measured in US dollars since 2011 has not kept up with US inflation.

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