Eskom appears set to earmark 2020 as the year in which it will fight to recoup its stratospheric losses from cash-strapped consumers. In February, hearings begin in which Eskom will petition the national electricity regulator, Nersa, to recover from consumers an additional R27-billion in costs incurred in 2019.

This comes after the first of three high court reviews began last week through which the stricken utility wants the R23-billion back from consumers for 2019, 2020 and 2021 that Nersa disallowed because of a bailout from the government. (The National Treasury has agreed to R23-billion a year for the next three years in balance sheet support for Eskom.) 

Nersa reckons this could push tariffs up by 50% over the next three years. Energy expert and activist Ted Blom says the additional R27-billion request by Eskom will also double your electricity costs in 2020 if granted.

Either way, the Eskom fight means it is gunning for increases of more than 20% over the medium to long term to stave off the death spiral it is in. 

On Tuesday, January 21, Blom told Business Maverick that two petitions he had launched had attracted signatures from 330,000 consumers, but he warns that people need to do better to make their voices heard.  Eskom has five million customers and a petition even of this size can be batted away when hearings for the R27-billion cost clawback begin around the country in February. [For more see Blom’s website http://www.eeco.co.za]

Nersa did not allow Eskom the tariffs it requested throughout the era of State Capture and utility bosses now deny that corruption and mismanagement are behind the escalating costs and ballooning debt at the monopoly electricity provider.

In Eskom’s application before Nersa, it says that it has a balance of R27.2-billion in the regulatory clearing account, a clawback facility that allows it to claim back unforeseen expenses through an application and a process of public hearings. In the application, Eskom reveals that its cost drivers have been procuring coal (actual costs of R49-billion instead of the budgeted R39-billion), buying diesel for the emergency open cycle gas turbines that have been pumping to keep the lights on (R3.7-billion instead of R345-million), among other unforeseen expenses in depreciation and employee costs.

Cahora Bassa was unable to supply contracted hydro-electric power and nuclear fuel costs increased as the currency weakened.

Eskom underspent on buying from independent power producers although the fightback faction spins a narrative that it is these costs which have bankrupted it. The utility budgeted R26-billion from the independents, but only spent R24-billion with them.

“A revenue variance of R5.4-billion is included in the RCA balance. This is due to the total sales volume in the decision not materialising. Electricity sales during the period under review reflect a challenging macro-economic environment. The extreme drought conditions and depressed commodity prices put a damper on electricity sales in the agricultural and mining sectors respectively,” said Eskom in its application to Nersa.

In its various applications, Eskom baulks at trimming staff numbers, which would be difficult because of a militant and well-organised trade union sector. But it wants to pile the misery on to consumers through higher tariffs. Organised business has raised the red flag on the lightning-fast growth in electricity costs, meaning that consumers are the sitting ducks.

Eskom claims that electricity is still too cheap in South Africa, but it uses dated studies by the World Bank to make these arguments.

Frank Hinda, the acting GM for energy management at City Power, which supplies electricity to Johannesburg, says they have calculated that Eskom’s various reviews and applications amount to an additional R180-billion it needs in tariffs. That figure implies increases of 60%, but that would never be implemented in a single increase, he says.

Johannesburg has hiked residential tariffs by an average 13.7% for 2019/2020 while business consumers paid a lower increase. Cape Town held increases down to 8.88% as it subsidised the increase while Durban’s residential electricity tariffs grew by 14.4%.

Municipalities are also under stress from lower distributions from the National Treasury and higher employment costs will affect their ability to sustain subsidies, posing a power conundrum for consumers still on the national grid. BM