Eskom to bring up electricity increases again with Nersa

Downgrading would damage Eskom’s ability to meet infrastructure targets………..

Finance director Paul O’Flaherty of Eskom told parliamentarians on the public enterprises portfolio committee that electricity tariffs that were truly cost-related and this had to be borne in mind by the public if Eskom were to complete its R385bn power generating construction programme.

He told MPs that his organisation needed tariffs to reach a level of 90 cents per kilowatt hour in real terms by 2017 if Eskom was to pay its debt.   “We are at 60 South African cents at the moment and in real terms we need to get that up to 90 cents”, he said. According to a report in Business Day (26 June), National Treasury has received the Eskom proposal.

Each year Eskom has to approach Nersa, the electricity regulator in South Africa, for any tariff increases, usually mid-year, and O’Flaherty said Eskom hoped this year it would be able to extend the multi-year price determination (MYPD) period to five years from three to get financial certainty, and secondly to cover production costs when it approached Nersa this year.

He said erratic tariff determination over the five years leading up to 2010 saw the Kusile power plant project put on hold because Eskom “would not have been a going concern. The MYPD needs this sort of time frame for financial reasons”.

He said, “We need to constantly remind [the consumer] that Eskom has to have cost-reflective tariffs in order that our investment grade rating is sound. As we sit, we have raised R180bn in debt and we need to get to R300bn.”

He reminded parliamentarians that a good credit rating would prevent Eskom going the path of Sanral, where, he said, Moody’s had downgraded the road agency.

“I’m pleased to announce”, he said, “that 77% of our funding for Kusile is completely secured and the rest has been identified.”    However, the question of Eskom remaining a ‘going concern” covering its production costs was the issue now being faced, he noted.

O’Flaherty warned MPs that eventually, from an Eskom point of view, it had to “come  down to a further serious tariff rate discussion with Nersa” but he would not respond to MPs questions as to what tariff rate it was that he was referring to and what tariff rate it was that Eskom wanted.

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