Eskom’s financial crisis and its inability to produce enough electricity to prevent blackouts will get worse after a court ruling which prevents it from cutting power to defaulting municipalities.
Eskom is owed over R20 billion from municipalities which do not pay their electricity bills, but the power utility is now nearly toothless to do anything about it.
The Gauteng High Court ruled on 8 March 2019 that Eskom may not unilaterally disconnect defaulting municipalities from power.
The power utility has previously threatened to turn off areas that have fallen behind their payments in an effort to get these municipalities to pay up.
The City Press has now reported that Eskom is likely to appeal this ruling, as it will exacerbate its already poor position.
Eskom in meltdown mode
Energy expert Ted Blom previously predicted that Eskom will “hit the wall” at the end of March, and his prediction is now becoming true.
Blom said Eskom is out of control and in meltdown mode, and he expects Eskom to breach its debt covenants which will force the power utility into business rescue.
Debt covenants are agreements between a company, in this case Eskom, and its creditors which typically state thresholds for financial ratios which may not be breached.
“This government does not want to put Eskom into business rescue, but it is the only rational thing to do under these circumstances,” Blom said.
“In the meantime they are holding everyone in this economy to ransom, we are losing jobs and the tariffs are going through the roof.”