Massive electricity price hike on the cards for South Africa
(000228.79-E000157.73NRLOSUC20V)
South Africa faces a hefty electricity price hike in April despite ongoing load shedding and energy production concerns surrounding Eskom.
The National Energy Regulator of South Africa (Nersa) has invited stakeholders to comment until Friday (14 January) on Eskom’s proposed tariff increases for the country.
Eskom chief financial officer Calib Cassim has confirmed that the state-owned power utility has applied for an electricity price increase of 20.5% for its 2023 financial year, set to take effect from 1 April 2022.
However, analysts have raised concerns as to what increases will actually be pushed through, with Nersa’s tables showing hikes of as much as 40% depending on how outstanding debts are clawed back.
On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.
Presenting Eskom’s interim results on 15 December, chief executive Andre de Ruyter warned that the seasonality of Eskom’s performance means that there is considerable cost pressure in the second half of the financial year, driven largely by summer maintenance requirements and costs associated with ensuring the security of supply.
He said that while the phased easing of Covid-19 lockdown restrictions has led to an improvement in financial performance during the first six months of the year, ongoing risks for Eskom’s sales and revenue include supply constraints, load shedding and load curtailment, as well as a constrained economy.
The chief executive said that to achieve independent financial sustainability, remain a going concern and meet debt service requirements on a standalone basis, the price of electricity in South Africa must migrate towards a cost-reflective tariff.
“We have to emphasise that the power system is unreliable and unpredictable due to insufficient maintenance of generation plant over many years. Maintenance outages take around 24 months to plan, and take from three to six months to execute.
“The response to the pandemic prevented us from doing as much maintenance as we would have liked, while prevailing liquidity challenges continue to constrain funds available for maintenance,” he said.
“To date, we have released funding of R8.3 billion for outages during the 2022 financial year, and R8.2 billion for those in 2023, against a requirement of R10.7 billion next year.”