Bid To Cap Electricity Hikes

With the ever increasing cost of living, the government hopes to contain electricity tariff increases to a maximum of 12% over the next four years.

According to reports, Eskom faces a revenue shortfall of R225bn, with plans to make up the shortfall through a combination of increased tariffs, savings and cash, most likely to come in the form of the conversion of loans to equity by the Treasury. In an effort to return Eskom to financial sustainability, an inter-ministerial task team tasked with finding a solution to Eskom’s financial crisis, has put the above recommendation to the Cabinet in the hope that Eskom will ward off a further credit ratings downgrade to junk status.

Bid To Cap Electricity Hikes According to insiders involved in the process, to secure Eskom’s sustainability, an increase around 16%in tariffs would be ideal, but it is feared a hike of this magnitude may damage the economy, as a result, many in the team believe a 12% increase a year would be best.

While higher tariffs are a necessary part of the package, it does not necessarily mean that Eskom will apply to the National Energy Regulator of SA (NERSA) to have to reopen the multiyear price determination. A likely way forward would be Eskom using its right to claw back unearned revenue through what is called the revenue clearing account, with prices being raised each year anyway, but by a varying margin.

 

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