Power utility Eskom is facing a R225-billion shortfall after receiving an 8% annual tariff increase over five years - half what it had applied for.
The National Energy Regulator of South Africa (Nersa) announced the tariff increase in February.
Estimates are that Eskom would receive R863-billion from its sale of electricity to businesses, municipalities and households over the five-year period.
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Eskom’s division executive for regulatory and legal affairs, Mohamed Adams, told the National Council of Provinces’ select committee on labour and public enterprises on Wednesday that the shortfall could not be made up for through increased efficiencies alone.
The utility would implement an integrated delivery programme, including pursuing efficiencies, expected to yield cost savings worth R30-billion, he said.
Further, the programme would look at how Eskom’s total business could be reshaped, along with identifying additional support that might be required.
Mr Adams said the phasing in of the revised tariff structure would be weighted towards the end of the five-year period. He said R10-billion would be cut during the 2013-14 financial year, followed by R24-billion in the 2014-15 year. A cut of R41-billion would be made in the 2015-1 6 year, followed by R62-billion in 2016-17 and R88-billion in the final year of the period.
Mr Adams said the main cost savings would come from primary energy expenditure, depreciation of equipment, operational expenditure and returns. Despite the disallowance of the tariff increase applied for, there had been no limitation of Eskom’s mandate.
The power utility along with the shareholder, the Department of Public Enterprises, had to address policy issues. These included Eskom’s role in the building of electricity infrastructure beyond Kusile.
Further, there was a possible need for government support, the regulation of coal prices and the declaration of the commodity a strategic resource. No mention was made of the government appointing Eskom to own and operate the three nuclear power stations if that build programme receives final approval.
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