BusinessLive reports that the National Energy Regulator of SA (Nersa) has delivered a strong signal to Eskom that it is not open to steep tariff increases in future.
Instead, the power utility must look at shutting inefficient power stations and cutting its head count and capital spending to tailor its cost base to lower sales volumes. The regulator, which in mid-December granted Eskom a 5.2% tariff increase for 2018-19 instead of the 19.9% Eskom had applied for, has published the reasons for its decision on the tariffs on its website, painting a picture of inefficiency, inaccurate forecasting and cost overruns at Eskom. Nersa warned of a "utility death spiral", saying Eskom’s continued increase in tariffs has caused lower electricity consumption, leading to a vicious cycle in which the utility has been trying to recover the same costs from a shrinking customer base, prompting further demands for tariff increases. Nersa cut R11bn off the revenue that Eskom had applied for to cover its operating costs, reducing the sums allowed for staff and maintenance costs as well as for corporate overheads. Nersa said its own bench-marking study had found that Eskom had more than 6,000 excess employees, at an extra cost of R3.8bn.
- Read this report by Hilary Joffe in full at BusinessLive
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