Eskom wants another R8.4bn from clients

The utility claims this amount flows from the under-recovery and wants it added to next year’s tariffs.
Eskom fights Nersa. Image: Waldo Swiegers, Bloomberg

While subjecting households and businesses countrywide to rotating blackouts this week, energy regulator Nersa has published for comment Eskom’s latest submission for additional revenue to be recovered from electricity tariffs.

Eskom is claiming an additional R8.4 billion in terms of the regulatory clearing account (RCA) methodology, a risk mitigation measure to protect Eskom and the consumer when actual numbers vary from those assumed when tariffs were set.

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If Eskom succeeds, the amount will be added to its revenue from electricity tariffs in 2022/23.

Nersa however has not yet determined the revenue for that year, and therefore it is not yet possible to calculate the possible impact it would have on the tariffs.

Have your say

The regulator will hold virtual public hearings in July and has indicated that it will finalise its decision near the end of August.

Whatever amount Nersa approves can be added to tariffs from April 1 next year for end users buying directly from Eskom and from July 1 for municipal customers.

This application comes as Nersa’s appeal is pending against a high court decision that it should add a further R69 billion unlawfully subtracted from Eskom’s revenue in the period 2019/20-2021/22. Nersa and Eskom earlier agreed to the liquidation of R10 billion of this amount, which was added to the current year’s tariffs.

Nersa argues in court that the matter should be remitted to the regulator, rather than having the court decide on the specific measures to rectify the situation.

Over and above that, there are three other Nersa decisions that Eskom has challenged in court that still have to be determined that could push Eskom’s additional entitlement to above R90 billion. All of this will have to be paid for by consumers in the next few years.

Low sales

According to this latest submission by Eskom, the under-recovery is driven by lower than expected sales volumes and higher than expected costs. 

Eskom claims R5.6 billion additional revenue due to lower sales volumes.

It states specifically that lower sales due to load shedding were excluded from its claim. It further indicates that the financial year included four days of the hard Covid-19 lockdown, which also impacted sales, and that it did not claim additional revenue in this regard.

At its interim results presentation in September last year, Eskom showed that its sales have been declining consistently since at least 2016, while its revenue has been increasing.

The other big variance supporting Eskom’s’ claim is R4.9 billion for primary energy. While its coal burn cost was R2.1 billion lower than projected, it spent R2.4 billion more on its diesel-gobbling open-cycle gas turbines (OCGTs) to minimise the impact of load shedding on the economy. 

Start-up fuel oil cost the utility R2.2 billion more than expected. Eskom explains that heavy fuel oil is used for the start-up and shut-down of a coal-fired power station and stabilises the boiler flame on occasion, for example when “operating at low load”.

Load shedding is costly 

Eskom admits that the number of unplanned outages and trips “were significantly higher in the FY2020 than what was anticipated at the time of the 2020 application and determination”.

According to Eskom Nersa made an incorrect calculation when it initially determined its revenue for 2019/20, and that is also included in this RCA claim. 

It further claims an additional R1.6 billion for international power purchases, mainly from the Cahora Bassa scheme in Mozambique, from which it was able to secure additional supply.

Some line items saw variances in favour of the consumer. After this has been considered, it leaves a balance of R8.4 billion in favour of Eskom, which it hopes to recover in the next financial year. 

Death spiral

Dave Mertens of the Association of South African Chambers says it is clear from Eskom’s declining sales that it is firmly in the utility death spiral.

Higher tariffs will not be bad for business only, he says. As consumers battle to pay for electricity, it will depress demand further and lead to a further decline in Eskom’s sales.

He says Eskom is forced to rely on its old coal-fired power stations due to the poor performance of Medupi and Kusile. This results in the stops and starts that require increased use of fuel oil and OCGTs and other hidden costs.

Mertens says Nersa must scrutinise Eskom’s submission and ensure that consumers don’t pay for inefficiencies.

“Eskom got a big tariff increase this year. Anything Nersa approves in terms of the RCA will be over and above the base tariff, which is already at a very high level.”

COMMENTS   29

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Eskom will sell less and less electricity as people install solar panels to lessen the impact of load shedding. And these people were paying customers, unlike some other people that did not pay and were stealing electricity.
Eskom’s future is not very bright.

And as municipalities obtain IPP sources in order to sustain then Eskim will be able to stop the evidently endless load-shedding. How about some pebble-beds?

Pebble bed research in South Africa was stopped years ago.
But here’s an though after I spoke to a retired navy ships engineer.
instead of the pebble bed, if you use huge ships engines which which can run on any comustible liquid or gas and which has a vast improved efficiency of over 50%!
You can turn pulverized coal to gas (which is very much cleaner than normal burned coal) and with the higher efficiency you’ll use less fuel.
Or use natural gas, or use alchohol etc.

Anything nuclear in municipal hands sounds scary…was the Chinese prototype ever completed, it’s the only example at any scale ?

I remember a book I’ve seen in a bookshop. The title? “I was your customer”

You may be underestimating the effect of Mr Patel localising the production of solar panels.

Like a candle in the wind……?

Eskom wants and wants and wants

One day they will want our breakfast, lunch, dinner, salary, motor cars, houses, furniture and still be bankrupt.

The scam artists (Eskam) are at it again!! Higher and higher tariffs, year after year, to cover the costs of endemic corruption and incompetence.

When will it stop?

Eskam’s death spiral is surely underway. I predict a further rise in illegal connections as the citizens of S.A. simply cannot afford electricity.

And who recalls Ramaphosa’s comments in March 2018 about the need to contain administrative prices? Just more unfulfilled promises.

Under-recovery is due to theft and non-payment for a the utility.

Therefore Eskom needs to recover it from those elements, dating back to 1994.

Unless the culture of non-payment for services/utilities is tackled for good, this will be a recurring theme year after year.

The irony is that those that don’t pay for the services are the ones that undertake service delivery protests while those that pay continually receive disproportionate increases for the service.

100 % correct, the Freeloader is King in this country, has all the time in the world to protest and cause havoc, while us minority try uphold standards by working our rings off to pay our bills( and theirs)!!!

It’a FAIL for sure!!!

Spot on comment.

Any credit controller worth half a pinch of salt will collect the arrears.
Collect the arrears, start with Soweto – or is the politically unacceptable ?

any person with a little bit of logic sense can work it out that eskom is all the way farming backwards:

they sell 1 product which they can’t fully produce to full demand at the most economical way possible (declining power stations, no maintenance for 20 years and cadre employed overpaid overstaffed employees are some of the bad input side facts + the gupta effect + buying wrong coal at ridiculous high prices etc etc).

on the output side they sell a product where some municipalities has not paid for how many years (they can write it off as a bad debt by now), electricity is stolen/tapped for 100%free -where electricity was exported to foreign countries, dont know if it was paid at all, due to eskoms own incompetence the cost of the product is higher than what the selling thereof, another reason why eskom is so s–t scared for alternative / opposition power suppliers

to date eskoms only solution to this problem was more government guaranteed loans and increased tariffs to the actual paying users /debtors of their electricity (the taxpayer once again) – it is crystal clear they did not / do not have the faintest clue how a business is run in the first place

The soviets in the old USSR kept on operating depleted gold mines to uphold the farce of full employment. Workers risked their lives digging ore that held zero gold. Farmers fed bread to their pigs because the subsidized bread was cheaper than wheat. It is clear why this system fell apart – there was no competition of the free market, and no price signals to enforce efficiency of production.

The ANC, and Eskom specifically, is in the exact same position. The inefficiencies of socialist and communist ideals will bankrupt the state like it bankrupted the USSR. The SOEs are the vehicles of destruction through which the ANC will dump the population in immense poverty and hardship in the name of job creation, and cadre deployment opportunities. Eskom is a creche for the politically connected elite, camouflaged as a utility.

Brilliant strategies ! Deliver less in an ever more unreliable manner and kick those clients in the teeth that are in any case paying for the suppliers inability to shut down those that consume without paying. Reeks of Communism just before the collapse. Absolutely disgusting.

100% overstaffed and not a murmur about reducing. So you have reduced delivery, reduced consumption, 15% wage increase coming……

Andre pack your stuff they are just setting you up…

and with the reduced production of electricity they still need the same size of work force – Mwatt per employee is just coming down per head till it is zero – but the cadre employees we must have.

sounds similar to saa – not a single aircraft in the air, but we have the employees – incompetent, clumsy, and bankrupt

Let’s not mention how Numsa wants 15% increase in salary. Has anybody heard this interview yesterday on Safm?! Absolutely ridiculous. Eskom is not moving from 1.5%, which is already generous given that employees are already overpaid.

Eskom an enemy of the economy, underlying corporate South Africa and people YET, some 14 years after the first blackouts, the issue is not resolved. Unacceptable by any standard YET Eskom has not made any effort to get rid of the 13,000 excess staff they claim to have! Unacceptable. Who is ultimately responsible, the ANC Government. Just like Mkhize if the reports are true, they continue to ‘steal’ with abandon. They continue to disrespect this country while Eskom infighting continues. Where is the push-back from civil society? On top of this, the government now wants to disarm citizens who cannot even have weapons for self-defense when the alarms are not working?

Maybe Eskom should start by getting SOWETO to pay up!

User pay principle applies… Am I wrong or right Tito Mboweni? PRavin Gordhan? Yes/No? The same thing the two of you said about ETOLLS

Eskom pays R26 a roll of toilet paper, R51 for a refuse bag and R20 per liter of milk.

Now they want to get it from us???? Like SAA water at 5 times what I can buy it for.

You cannot make this up but here it is……I absolutely hate Eskom, when they ask me to reduce ???? enough said about excesses.

You are supposed to become ambivalent about the facts and go bezerk about all that is totally irrelevant. When anyone else tries to speak then you chant hoo-hah endlessly. Now the playing field rules become level.
And the result is no interest = win for status quo.
Only the stupid can be duped repeatedly. And they have been kept stupid for this very purpose.

Is it just a coincidence that almost every time Eskom puts in for more tariff increases we get rolling blackouts, euphemistically called loadshedding? Maybe some enterprising journalist should dig out the periods when Eskom has applied for increases and when rolling blackouts happened?

My comment criticizing Eskom still awaiting ‘moderation’ by Moneyweb. Eskom treats the country like s$%t yet valid criticism must be moderated and possibly removed? Unbelievable – the country is a joke.

Forget big solar and batteries, I may as well run my factory on my own diesel sets. I am in 2020/21 tariffs a shade under R3/kWh.

I can easily run enough solar and batteries to handle evening and weekend loads resting my generators and not using grid at all.

On sunny days my solar is synced with generator bank so run say 200kVA gennie and solar 600kVA for fuel saving

Keep a 100kVA grid to stop being charged for not using grid and as partial backup to my grid.

Insane but true

Love that term, “charged for not using the grid”

Must be careful, if I go away and not use power they can’t supply I will be charged. ha ha.

i suppose it makes sense they charge us when the power is off. bunch of useless clowns.

Most bylaws have clause that council can charge you a fee for having an erf with electrical supply but then not using it.

Once again the in-competencies of a totally failing SOE is being sponsored by the over taxed, overburdened paying consumer.
Failing municipalities who collected power payments had not passed it on. Rampant tender theft prevails as is exposed on a daily basis and it is time to draw a line.
Let 100% of all Eskom staff re-apply for their positions, have their competencies assessed by an independent assessor.
Have full forensic audits done on all.
Have lie detector tests done on all.

You get told to save electricity
You get lambasted with crazy tariff increases
Not their is an under recovery and high overheads (The latter can easily be cut by at least 45%) Just do a proper forensic value adding expenditure audit and remove all the non value adding overheads.

The fact that both Eskom and Nersa are state owned, makes the decision a weighted one not in the consumer’s favour. Just look at the decisions made in the past years.
It seems that the brief is misunderstood, ie they are not controlling the increases pushed through by Eskom, they just appear to be controlling them.

End of comments.

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