Price of power from Eskom to go up nearly 19%

Eskom failed to get approval from the nation’s energy regulator to increase tariffs by about a third, an amount it said was needed to help limit worsening electricity outages.

The utility applied to the the National Energy Regulator of South Africa (Nersa) for a price increase of 32% for the 2024 financial year to pay for more purchases from independent power producers as it struggles to meet demand.

The regulator instead allowed Eskom to increase tariffs by 18.65%.

The cash-strapped company has said funding shortages hurt its ability to maintain plants and buy diesel to fuel auxiliary turbines when its coal-fired units fail.

South Africa has over the past two decades gone from having surplus power to regular blackouts, locally known as load shedding.

Financial constraints at Eskom, which has R396 billion ($23.6 billion) of debt, combined with operational challenges, caused the utility to impose more than 200 days of blackouts in 2022 to save the national grid from collapse.

“Eskom has both a debt problem and operational problem which makes the prospects of recovery very slim,” Rashaad Tayob, head of fixed income at Foord Asset Management South Africa, said before the announcement.

The nation’s tariff methodology is similarly flawed and gives “Eskom no incentive to control costs,” he said.

Eskom will be allowed to lift tariffs by 12.74% for the next year, Nersa said in a briefing on the decision.

With assistance from Prinesha Naidoo and Colleen Goko.

© 2023 Bloomberg L.P.