South African regulator allows Eskom to raise tariffs by 5 percent in 2018/19

South African regulator allows Eskom to raise tariffs by 5 percent in 2018/19
An Eskom logo is seen at the entrance of their head offices in Sunninghill, Sandton
By Tanisha Heiberg

PRETORIA (Reuters) - South Africa's energy regulator Nersa said on Friday it had granted scandal-plagued utility Eskom a 5.23 percent electricity tariff increase for the 2018/19 financial year, less than the 19.9 percent the power firm had requested.

The country's sole power supplier is engulfed in a governance and financial crisis and has been at the heart of allegations of illegal contracts and undue influence in awarding tenders to the Gupta family, friends of President Jacob Zuma.

Zuma and the Gupta family have denied any wrongdoing.

Eskom has said the 2.2 percent tariff increase it was granted by the energy regulator for 2017/18 had presented challenges to the company’s liquidity position for the current financial year, and hoped it would get a higher raise this year.

It was granted a 9.4 percent tariff rise in the 2016/17 financial year.

Prior to the announcement by the regulator on Friday, the cash-strapped utility had said it needs high electricity prices increases to shore up its balance sheet.

"We are disappointed that we couldn't get at least a double digit increase or at least what we were hoping for," Eskom's spokesman Khulu Phasiwe said.

"We now have to go back to the drawing board."

Over the years, Eskom levied above-inflation increases on its customers, provoking cries from industry and households alike.

South Africa's latest inflation figure stands at 4.6 percent in October.

The central bank said in November a large tariff increase was one of the risks to inflation that had prevented it from cutting lending rates further.

"We have to balance the interest of the public with their (Eskom) sustainability," said Nersa chairman Jacob Modise.

The government has earmarked the struggling firm for a bailout. Eskom is already reliant on 350 billion rand ($26 billion) guarantee from the Treasury, and has been persistently cited by rating agencies as major risk to the South Africa's credit rating.

($1 = 13.3654 rand)

(Writing by Mfuneko Toyana; Editing by James Macharia)

First Published: 2017-12-15 15:04:19
Updated 2017-12-15 15:49:32

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