Eskom, and the rest of South Africa for that matter will be waiting with bated breath until 25th February to hear if Eskom will be granted a 16.6% tariff hike.

The National Energy Regulator of South Africa has held hearings on Eskom’s regulatory clearing account as well as a proposed 16.6% tariff increase across the country, which concluded in Midrand on Friday.

The power utility has already been granted an 8% increase in tariffs but is seeking an additional 8.6% to offset costs of R22.8 billion incurred by running open-cycle gas turbines to combat load shedding, lower-than-expected sales figures, and other unforeseen costs.

These factors drew the ire of analysts during the hearings last week. Chairman of the Standing Committee on Economic and Trade Policy, Martin Kingston said that a tariff increase this high would make businesses uncompetitive.

“Eskom’s customer base will be compromised if their viability is undermined by electricity which is not reliable, predictable and competitive,” said Kingston in a report on IOL. “Consequently, consumers will pay higher unit costs for electricity, leading to pressures on business and the prospect of further reduction in demand.”

Kingston believes that electricity demand will remain low until 2018/2019, which will have an impact on Eskom’s revenue which would then trigger more tariff increases. “This constitutes a vicious cycle that needs to be urgently arrested”, concluded Kingston.

While a tariff hike is bad news for those of us at home, mining companies would be the biggest hit by a hike this high.

According to Sibanye Gold Vice President for Technical Services, Peter Turner, the mining company uses 1.6% of Eskom’s output, costing the company R3.1 billion just last year.

Clearly something has to give at this point and it’s up to Nersa to decide if it will be Eskom, or its customers.

[Via – IOL] [Image CC by 2.0 – TimOve