Photo by Gallo Images/Charles Gallo

“Eskom 15% tariff increase application is credit positive” – says Moody’s

Just so we are clear, this is 15% plus 4.41% that is being proposed from the next financial year.


Photo by Gallo Images/Charles Gallo

Eskom has to wait until 1 March 2019 to get a decision from the National Energy Regulator of South Africa (NERSA) on its application to increase electricity tariffs by 15% for the next three years.

The power utility is already facing a whole range of lows. This, however, it has proposed, will lift off a lot of the debt it has accumulated over the years due to the mismanagement of funds and the maladministration that plagued it for many years.

Why Eskom seeks to implement 15% tariff hike from 2019

On Friday, 19 October, the power utility submitted an application to NERSA, seeking the nod from South Africa’s power regulator to go ahead with the tariff increase.

This increase is an attempt by the power utility to claw back to the greens in its financial books. According to Carol Paton from Business Day, this is an attempt by Eskom to recover from its inability to meet its debt obligations.

Read – Eskom’s latest stage of load shedding could keep power off for 12 hours a day

For at least the next five years, the power utility has to deal with an interest bill of R215-billion, alongside a rising debt bill that, as of now, stands at around R350-billion.

According to a report on IOL News, NERSA noted that it had received Eskom’s fourth Multi-Year Price Determination Regulatory Clearing Accounts (RCAs), which totalled R219-billion, R252-billion and R291-billion respectively for the next three years.

Moreover, should this be passed, the 15% will come on top of an approved 4.41% tariff increase that was signed off by NERSA to claw back R8-billion in consumer shortfall from the previous financial year.

Moody’s backs Eskom tariff increase application

For household owners and businesses, the tariff increase is a nightmare that is not needed. This will most certainly affect the state of inflation in South Africa and prompt businesses to hike product prices.

Read – Eskom dim optimism surrounding South African economy

However, ratings agencies such as Moody’s sees this in a different light. According to Helen Francis, a senior credit officer at Moody’s, this move will do good for Eskom’s rotten credit status.

“A 15% rise in each of the three years would allow Eskom to address rising operating costs and its still sizeable capital expenditure programme, which includes the completion of coal-fired generation projects as well as new investment projects,” she stated.

Francis also indicated that this move would also allow the power utility to service its debt obligations much easier.