Unbundling Eskom is like shifting chairs on Titanic

The Eskom Megawatt Park headquarters in Johannesburg. Picture: Waldo Swiegers/Bloomberg

To mitigate price gouging, governments often create a regulatory body to approve tariff increases. In SA that is the National Energy Regulator of SA . It is inevitable under this market design that the regulator and utility will get into disputes over requested tariff increases, as they will have different views of what reasonable tariffs are. Eskom’s past tariff increase applications have almost always seen Nersa pushing back, at times leading to court cases.

Mismanaged vertically integrated electricity monopolies often pose a systemic risk, which leads to erosion of reserve margin from underinvestment in new capacity or maintenance, resulting in electricity consumers being forced to do without electricity either indiscriminately through “load-shedding” or targeted heavy users being forced to shut down .

In an electricity monopoly market, the state-owned vertically integrated monopoly is often forced to enter into unprofitable contracts to pursue government policy. In this regard, Eskom was forced to enter into renewable energy power purchase agreements that it repeatedly protested would lead to higher tariffs.

And cross-default to ensure lenders can call default where an affiliate of, or major party related to, their borrower is in default. This ensures lenders are not left out on any bankruptcy proceedings or restructuring that may affect them.

Source: News Formal (newsformal.com)

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