Eskom: Retroactive payment?

2008-03-26 00:00

Electricity consumers may be compelled to pay the possible higher electricity price retroactively if the increase applied for is not approved before April 1.

Thembani Bukula, a member of Nersa (the National Energy Regulator), responsible for electricity, has confirmed that Eskom wants the additional price increase, for which it applied to Nersa last week, to take effect from April 1.

“Eskom projects its annual revenue in the application and expects to be able to achieve it,” said Bukula. Eskom’s financial year starts on April 1.

According to Bukula, the chances that the process of assessing the application for the price increase before April 1 are slim. “It could take two to three months,” he said. “This therefore implies that the increase will have to be retroactive.”

Eskom submitted an application to Nersa last week requesting a 53% price increase, or a 60% nominal price increase. Bukula says this increase is in addition to the 14,2% nominal increase approved last year, which is due to take effect from April 1.

Eskom is, therefore, requesting a total price increase of 67,2%.

A source high up in the industry says Eskom wants Nersa to approve an increase slightly higher than this 53%, in order to compensate for the first three months of the financial year in which the entire increase did not apply. If Nersa approves the application, the total price hike will, therefore, amount to more than 67,2%.

While political parties and trade union leaders have reacted angrily to the application, analysts say a sudden sharp tariff hike is not necessarily only bad.

“A sharp increase is bad for growth and has a substantial effect on inflation,” said Cornelis van der Waal, an analyst from international consultancy Frost and Sullivan.

But, “Eskom has to borrow money to finance its expansion programme. The loan will have to be repaid with interest … If the amount is too high it would influence the assessment of (Eskom’s) credit worthiness and a higher interest rate could be charged.”

Adam Gordon, sector specialist in project financing from Investec, says that if consumers don’t pay more now, they will have to pay later in the form of taxes.

However, Gordon says consideration could be given to stretching the increase over more than one year.

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions. publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.