Saturday , May 15 2021

Eskom needs more than R100bn, says large energy user body

The Energy Intensive User Group (EIUG), which represents large energy users who collectively consume more than 40% of Eskom's electricity supply, is anticipating that President Cyril Ramaphosa will make an announcement in Thursday's State of the Nation.

And it should be more than R100 billion Eskom has suggested, says EIUG project manager Shaun Nel.

Nel spoke to Moneyweb on the sidelines of the national energy regulator Nersa's public hearings in Midrand about Eskom's application for steep increases in the next three financial years.

Eskom initially applied for a 15% increase annually for the next three years, but revised its application in the last few days to 17.1% in 2019/20, 15.4% in 2020/21 and 15.5% in 2021/22.

More money for less power

This comes after Eskom revised its projected sales downward but kept the required revenue unchanged due to the lower output of its power stations.

Eskom also revised the 78% energy availability factor (EAF) of its generation fleet that is based on its application on-71.5%, 72.5% and 73.5% in the three respective years. Full-time regulator member for electricity Nomfundo Maseti, who chaired the hearings, questioned whether Eskom would have been able to achieve the revised EAF since 60%.

In the case of Eskom, there is no need to pay for the expense of the taxpayers. If the taxpayer is not satisfied, The assumption of the tariff was that it did not materialize as expected.

Nersa is also considering a further RCA application for an additional R20 billion, which could add a further few percentage points if approved, depending on when it is liquidated.

Read: Eskom sees R20bn FY loss, seeks higher tariff hikes

First things first

The EIUG is called the suspension of the Nersa process. Nel said the methodology is designed to deal with a stable utility. Eskom is currently the subject of several parallel processes, and announcements about its restructuring and debt position are expected. He said these processes should be dealt with first, before a decision could be taken about a multi-year price path.

During the hearings, Eskom was severely criticized for revising its application upwards. Professor Jannie Rossouw said on behalf of the Fiscal Cliff Study Group that Eskom needs an austerity budget specialist to help him save money and budget properly.

He called Eskom a bully and said that despite being a monopoly, it is pricing itself out of the market.

Rossouw called for an end to payout of all the bonuses at Eskom and said the utility should disclose detailed employment numbers weekly. He also called for all Eskom board meetings to be open to the public.

He said Nersa is an austerity budget specialist. He has shown up for a while.

Increases would be devastating

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) said the impact of the increase was Eskom is asking for its devastating to its members. I do not know if I will be able to do that.

The Helen Suzman Foundation said Nersa's methodology can not deal with the current instability at Eskom.

Nicholas Barnes, chairman of the Johannesburg Property Owners and Managers Association, which represents owners and managers of residential properties, said a 15% Eskom tariff increase would catastrophic for the working class tenants in those buildings.

Nersa is expected to announce its decision on the three-year tariff application as well as the RCA application by the middle of March.

It should take effect on 1 April for Eskom's direct customers, and be factored into the new municipal tariffs that take effect on July 1 in municipal supply areas.

Read: Recommendations to Nersa on Eskom transparency

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