(Bloomberg) -- South Africa’s state-owned power utility asked the electricity regulator for permission to raise prices by 36% in its 2026 financial year, far exceeding inflation in the continent’s most industrialized economy.
Eskom Holdings SOC Ltd. told the National Energy Regulator of South Africa that it sought the hike because prior increases were “inadequate” for its financial needs, it said in a submission to Nersa. The nation’s annual inflation rate for August was 4.4%.
South Africa has grappled with rising electricity costs that have roughly tripled over the past 14 years. The cash-strapped utility, which amassed 400 billion rand ($23 billion) in debt, has benefited from multiple bailouts from the National Treasury to keep its power plants running. Conditions of that support means that the loss-making company can’t take on additional loans.
The utility, which is responsible for most of South Africa’s power provision, has for years struggled to provide consistent electricity supply, crippling businesses and economic growth. While the country has gone more than 177 days without power cuts in 2024, record blackouts last year prompted many rich households and businesses to spend thousands of dollars each on clean-energy solutions.
“Eskom has made its revenue application based on the costs it will incur to efficiently provide electricity to the customer,” Chief Financial Officer Calib Cassim said in a statement. “It is a critical component in ensuring Eskom continues to provide reliable electricity services while improving its financial sustainability.”
The utility has applied for a 11.8% increase in fiscal 2027 and a 9.1% hike in 2028.
“Cost savings alone will not be sufficient to improve our financial health,” Eskom said. “The only way to achieve financial sustainability is to improve operating cash flows that results in positive free cash flows, with a strong focus on moving to a prudent, cost-reflective tariff.”
The utility said that while the government’s 254 billion-rand debt-support guarantee helps with its liquidity needs, it’s not enough for its long-term fiscal sustainability.
The government has stressed that it will not offer further support beyond its current guarantee insisting that Eskom must adopt cost-reflective tariffs for sustainability, leading the power utility to apply for an above-inflation tariff increase.
--With assistance from Rene Vollgraaff.
(Updates with comment from Eskom in seventh paragraph.)
©2024 Bloomberg L.P.
