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Eskom CEO Dan Marokane says the State-owned company is eager to participate in a "holistic conversation" about the gap that has emerged between the changes under way in the electricity sector and the rules governing the industry, including those related to the way tariffs are set.

In an exclusive interview with Engineering News, Marokane expressed optimism in Eskom's ability to bring an end to the devastating era of loadshedding, and indicated that the recent period of operational stability had helped to restore morale, slash diesel costs and provide the board and executives with time and space to begin focusing on the future strategy for the unbundled entities.

He acknowledged brewing opposition, however, to its sixth multiyear price determination (MYPD6) revenue application that could translate to a tariff hike of 36% on April 1 next year, if approved in full by the National Energy Regulator of South Africa (Nersa).

The MYPD6 application covers the 2025/26, 2026/27 and 2027/28 financial years and is due to be subjected to a public participation process in the coming months.

The submission has been prepared in line with the MYPD methodology that Nersa sought to overhaul last year, when the Electricity Price Determination Methodology Rules were approved in December.

That decision was rescinded by the Energy Regulator in July, however, when it emerged that the rules could not be implemented, partly owing to timing pressures and partly because they were not accompanied by a methodology to calculate the tariffs.

Marokane acknowledges that the rules, along with many other prevailing regulations governing Eskom and the sector, are "outdated" but says there is currently no clear action plan from Nersa on how these will be modernised to reflect the emerging realities of the industry.

Those changing realities are being addressed primarily through the National Energy Crisis Committee (Necom), but Marokane contends that regulatory changes are not keeping pace with the swift decision-making emerging from that structure, resulting in implementation risks.

"We need to bring the same level of vigour and pace that's on display at Necom into the regulatory environment, which means Nersa needs to move with pace," he tells Engineering News.

There might be a need, he adds, to bolster Nersa's internal capacity in the short term to enable it to address areas of concern, which range from the tariff structure to wheeling and feeding into the grid, to having new rules that cater for traders in areas where Eskom has sole distribution rights.

DEBT-RELIEF ALONE NOT SUFFICIENT

As part of the conditions of the R254-billion debt-relief package, the National Treasury underlined that debt-relief alone would not return the utility to financial sustainability and that tariff increases would also be required.

Eskom estimates that its tariffs are 25% to 30% below cost-reflective levels in real terms, depending on the licensee, be it transmission, generation or distribution, and its submission to Nersa seeks to address the deficit to provide revenue certainty once the debt-relief period ends in 2025/26.

The State-owned enterprise is already facing a backlash to the revenue application, despite it not having been officially released into the public domain. Nersa has indicated that it will publish the application on its website as soon as it has been assessed to be compliant with the prevailing rules, following which public hearings will be scheduled.

Marokane says he understands the concern being expressed by business, civil society, political parties and also the Government of National Unity, which has set reducing the cost of living as a key priority, alongside stimulating growth and job creation.

He also acknowledges ongoing criticism of Eskom's costs, saying: "I'll be the first to tell you that we need...