Eskom’s 15% tariff increase for the next three years may seem steep, but Eskom has run into challenges which it cannot solve alone, CEO Phakamani Hadebe said.
The executive made opening remarks at the National Energy Regulator of South Africa’s (Nersa) nationwide public hearings, which kicked off in Cape Town on Monday.
Nersa sets prices and tariffs for the power utility. Nersa is holding hearings over three weeks on an application from Eskom on tariffs for the years ahead and to recoup shortfalls in 2017/18.
Eskom chief financial officer Calib Cassim who was listed on the programme as the only executive to make representations on behalf of the power utility, asked chairperson of the hearings Nomfundo Maseti to allow Hadebe the opportunity to make remarks, to which she agreed.
Hadebe used the opportunity to detail the crisis at the debt-laden power utility.
“Eskom has requested a 15% tariff increase over the next three years – this looks steep. We will agree, but Eskom’s finances have reached a stage where Eskom, alone, cannot solve all the challenges it is facing,” he told the Nersa panel.
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There have been cost cutting initiatives to help improve the financial situation, however Eskom has a “balance sheet” problem, Hadebe explained.
“The biggest challenge is the balance sheet of Eskom which deteriorated over time,” he said. Debt which stood at R380bn at the beginning of last year has since grown to over R419bn.
“We are close to a debt trap,” Hadebe warned.
The cost cutting initiatives are not enough to save the balance sheet, and he called for a collective approach, with all South Africans doing their bit to assist. Hadebe said that painful decisions will be required by Eskom, South Africans and the shareholder (government).
Hadebe also said that the average price of electricity, 89c/kwh is the fifth cheapest in sub-Saharan Africa and that prices had escalated dramatically in the past eight to 10 years.
He acknowledged that Eskom as an entity contributed to the problems it and the country is facing. The problem is such that everyone, the whole country, must work together to solve it, he explained.
“Eskom deserves to apologise. It is compelled to apologise to South Africans for bringing these challenges. They were avoidable.
“All these challenges, load shedding, were built over time. But turning around an institution facing challenges takes time.
“So we apologise.”