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Eskom requests a whopping tariff hike amounting to more than 25%

by , 20 March 2015

So far this year, the country has dealt with multiple bouts of load shedding as Eskom struggles to keep South Africa powered with enough electricity.

Now it has emerged that in addition to an already generous hike approved last year, the power utility is requesting another tariff hike.

Let's take a closer look at the new tariff hike request…

Eskom cite the cost of diesel as one of its reasons for the tariff hike

Eskom is asking to raise its “power tariffs by 25% from next month,” reports Bloomberg. This as the power utility “faces a R225 billion cash flow shortfall”.

This comes just after Standard & Poor’s downgraded Eskom’s credit rating to junk.

Over the current financial year, Eskom had applied and gained approval for a hike of 12.69%, says BDLive. But now the utility wants an additional hike “to help pay for the cost of diesel to run its open-cycle gas turbines”.

Eskom has relied on these turbines recently to reduce load shedding, adds BDLive. And it wants additional monies “to pay independent power producers, whose contracts… expire at the end of this month”.

For the year to the end of March 2014, Eskom “spent R10.6 billion on running” turbines, notes Bloomberg. It’s been using then up to “12 hours a day, four times longer than they were designed for”.

The tariff hike could come into effect in just under two weeks

If the national regular approves the new tariff hike request, its direct customers could be facing the new tariff at early as 1 April, notes MoneyWeb. Municipal customers would have to cough up more from 1 July.

If the hike gains approval, it “it will cause havoc with municipal budgets,” says BDLive. These were to be finalised on 15 March.

Ian Neilson, the deputy mayor and member of the finance mayoral committee of the City of Cape Town, said such a large hike “may be unaffordable to many of our electricity customers, particularly residential users,” reports Fin24.

The tariff increase request already has the backing of “the government’s war room”, adds BDLive.

If Eskom gains approval for this additional hike, expect electricity to become much more expensive come the start of winter. And there will be a knock-on effect to inflation.

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Eskom requests a whopping tariff hike amounting to more than 25%
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