Sunday, 31 July 2022 09:35

Eskom applies for a massive increase to fund a new energy plan.

By Lehlohonolo Lehana.

Embattled power utility Eskom says it needs to hike tariffs to fund president Cyril Ramaphosa's new energy plan.

Speaking to the City Press, Eskom chief financial officer Calib Cassim said that the plan – outlined by the president earlier in July – came with many good news policies and changes but did not address funding.

Broadly, the president’s interventions include:

°Boosting the recruitment of skilled workers at Eskom and addressing sabotage and theft at the utility;

°Improving logistics to ensure that diesel-fired turbines are supplied in a timely fashion;

°Allowing Eskom to buy excess power from private producers;

°Importing more power from countries in the region;

°Implementing a programme to incentivise the efficient use of power to cut demand by 600 megawatts;

°Easing local content requirements so that renewable-power projects awarded in the so-called Bid Window 5 can go ahead;

°Boosting the size of the sixth bid window and expediting further rounds;

°Announcing a plan to deal with Eskom's debt before October.

Cassim said that key points of Ramaphosa's new plan require Eskom to do more maintenance while also increasing its sourcing of power from outside the company – both of which need money.

The power utility can apply to energy regulator Nersa to recover some operation costs and expenses through tariff hikes, which now appears to be Eskom’s key resource in funding the president’s changes.

In a consultation document published by Nersa this week, the energy regulator outlined Eskom’s most recent application for tariff hikes for the 2023/24 financial year. The document includes a projected tariff calculation showing a 38% hike next year, which Nersa said could be a possible outcome if Eskom’s wishes are granted.

Eskom's revenue application amounts to recovering R335 billion for 2023/24 and R365 billion for the 2024/25 financial year.

The group has asked to recover R85 billion for purchasing power from independent sources in 2023/24 and R101 billion for 2024/25 – one of the critical interventions mentioned by Ramaphosa.

In terms of maintenance, it wants to recover R20 billion for this purpose.

Notably, Nersa rarely gives Eskom what it asks for in these applications. Eskom applied for a 20.5% increase in tariffs for 2022, but Nersa only granted the company a 9.61% hike. The power utility is taking Nersa’s decision on review and challenging it and its methodologies in court.

Cassim said that Eskom was still reviewing the president’s plan and assessing how it would ultimately affect its operations. However, he said that Ramaphosa’s address made these expenses government policy, which should be addressed sooner rather than later.

The government will also be stepping in to assist Eskom by taking over some of its debt.

National Treasury is finalising a plan to take over a portion of Eskom’s R396 billion debt as part of a process to place the struggling electricity company on a sustainable footing.

Cassim said that the debt takeover would provide relief, but only temporarily, saying that tariffs must reflect actual costs to be sustainable in the long run.

Meanwhile delegates to the ANC's national policy conference have mooted that Eskom and other state-owned companies should be rehoused in their line departments, rather than under the umbrella of the Department of Public Enterprises.

If adopted at the ANC's national conference in December, Eskom would be moved to the Department of Mineral Resources and Energy. 

Ramaphosa's plan to end load shedding announced earlier this week was endorsed at the conference. However, delegates also expressed concern that the state should not abandon its responsibility to play a developmental role and be the provider of public goods such as electricity and that a commitment must be made to strengthen Eskom.

The delegates also revived several radical economic policy proposals, calling on government to revisit measures to strengthen the expropriation of land without compensation, review the mandate of the SA Reserve Bank and fast-track the establishment of a state-owned bank.