Eskom update: Energy analyst warns of 30% electricity tariff increase

The sheer volume of drama that 2020 has brought so far means that Eskom has taken up fewer lines in the news cycle than they would in any normal year, and now a tariff increase looms.

However, that certainly doesn’t mean that Eskom is any better off than they were before 2020 started, throwing up one headline-stealing catastrophe after another.

Eskom annual financial results

Mismanagement and looting at Eskom

Friday saw the Eskom release their financial results for the financial year ending March 2020. Not surprisingly, the results were very disappointing. The struggling SOE reported a nett loss of R20.5 billion.

The reported loss is a stark reminder of the deep hole that the national power generator has dug itself into.

The latest loss is the result of years of mismanagement and looting which has left Eskom deep in debt and with an ageing infrastructure which has been neglected for too long.

Eskom earlier this year won a court case against NERSA which could see the power utility increase their tariffs substantially in the next three years. Eskom are asking for tariffs to be what they call “cost-reflective” in order for them to recoup the cost of power generation adequately.

Eskom corruption to cost consumers

As reported by SABC, Analyst Ted Blom argues that all that’s really happening is that the cost of corruption and mismanagement at the power utility is going to be passed on to consumers.

This could result in increases far in excess of what makes sense as an inflationary increase. Blom explains that “cost-effective just means whatever it costs Eskom to run and generate a kW/h of electricity plus a profit margin”.

“[That’s] the cost they believe they are entitled to for the last 5 or 10 years with all the corruption. The cost-effective tariffs would, in fact, include all the corruption taking place at Eskom and then, of course, people must not forget there’s still a 10% increase waiting at the appeal court”

He adds that “if Eskom wins, that will come onto the 25%; the benchmark was CPI minus, so CPI this year is about 4.5% Eskom’s increase should be less than 4.5% .”

Massive price hike in COVID-19 wake

With the economy already straining under the effects of COVID-19 and the lockdown massive increases in electricity prices would be an enormous blow to households as well as industries already in dire straits.

The unfortunate truth though is that the government is in no position to help Eskom and should nothing change the power utility will continue to bleed money every year.