Eskom targets a MASSIVE increase for next year – more info here

Eskom plans to apply for a MASSIVE tariff increase from 1 April 2023/24. This was announced on Thursday.

ESKOM MADE THE ANNOUNCEMENT ON THURSDAY

The tariff application is under consideration by Nersa, which must make a final decision by Christmas eve at the latest.

It is believed that public hearings will be held next week. Eskom’s announcement on Thursday was to inform the public that it had updated its tariff application for the financial years 2024 and 2025.

THE INCREASED TARIFF IS BASED ON NEW ASSUMPTIONS

It had previously requested increases of 15% and 10%, respectively. That will now change to 32% and 9.5%.

The increased tariff for the next two years is based on new assumptions by Eskom. The first and most significant is the cost of primary energy, particularly diesel.

Due to global factors, Eskom now has much higher diesel costs, and due to the poor performance of its plants, it will also need to spend more on diesel than anticipated.

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The reports furthermore state that Eskom projects that primary energy costs will be 7.85% higher, with most of the increase (6.09%) a result of diesel.

The following assumptions have not changed from the original application:

• Operating costs
• Depreciation
• Value of regulatory asset base
• Capital expenditure

In an addendum document published on its website, Eskom indicated that while it previously budgeted R5 billion for diesel in 2023/4 the cost was more likely to be R16 billion.

THIS COMES SHORTLY AFTER ESKOM PUBLISHED ITS POWER OUTLOOK FOR THE YEAR AHEAD

Related to increased diesel usage is a dramatically revised view of Eskom’s electricity availability factor (EAF). This is the percentage of plants in good working order that can dispatch energy at any time.

Eskom estimated the EAF would be 72% when it first made this tariff application in June 2021. In January 2022, it revised this to 62% and now believes that 59% is a more realistic estimate.

This announcement comes shortly after Eskom published its power outlook for the year ahead.

For 49 of the next 52 weeks, the ‘likely risk scenario’ for load shedding is rated high. The only predicted respite comes for two weeks at Christmas, and during one week in September 2023. For the foreseeable future, Eskom is indeed operating ‘at Code Red’.

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