Energy regulator Nersa grants Eskom an 18.65 % tariff hike

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Consumers will have to grapple with higher electricity prices after the National  Energy Regulator of South Africa (Nersa) granted Eskom a 18.65% tariff hike to help it cover its debt.

This is less than the 32% that the utility had asked for 2022-23, but Eskom will get a further 12.74% in April 2024.

This is a 33.7% increase from 2020, according to energy expert Chris Yelland. 

Nersa said its “extremely difficult decision” sought to balance the needs of Eskom against those of consumers.

The embattled utility is looking to recover more than R350 billion with the hike.This comes at a time when Eskom has plunged the country into intensive stage six rolling power cuts caused by continued breakdowns at its stations.

Before approving the tariff, Nersa’s Nhlanhla Gumede said it was ironic that Eskom was requesting such “amounts, which are above inflation rate, at a time where the utility was failing to produce electricity”.

He noted that Eskom was unable to sustain itself because it continued to use its emergency diesel reserves to keep the lights on, adding: “The moment you use your emergency stock like its normal, then the utility has a problem.”

Last year was the worst on record since load-shedding was first introduced in 2007. Rotational power cuts were implemented on 208 days in 2022.

The higher electricity price will put a strain on already-struggling households and businesses, energy expert Tshepo Kgadima said.

“In entirety, we are seeing Nersa that has failed, notwithstanding the catastrophe that will accrue to the economy of South Africa and the actual financial ruling that will be meted to the people of this country, the electricity users and well as the financial losses that Eskom will suffer,” Kgadima said.

Presidential spokesperson Vincent Magwenya said President Cyril Ramaphosa could not interfere with a statutory process that Nersa must undertake.

Political parties reject the decision

The South African Communist Party opposed the electricity tariff hike, saying in a statement: “Eskom’s application for a 32% tariff hike for the 2023-24 financial year, if granted by the National Energy Regulator of South Africa, will manifestly be an additional albatross on the working-class and poor, who already face a growing list of impoverishing burdens on their necks.”

The Economic Freedom Fighters argued that Eskom’s problems were a consequence of maladministration and corruption by the governing ANC which had been left unattended for decades.

“Over the past 10 years, electricity tariffs have increased by a staggering 753%, which means that consumers are already paying high electricity prices which raises eyebrows as to whether Nersa is indeed as independent as it claims to be,” the EFF said.

“These electricity hikes happen amidst continuous rolling electricity blackouts, with many parts of South Africa not having electricity for a minimum of six hours a day, while conditions are worse for impoverished areas.”

Last year, the Johannesburg high court ordered Nersa to decide on Eskom’s multi-year price determination revenue application by Christmas Eve. The high court extended the deadline after members of Nersa’s electricity committee flagged concerns.

Yelland predicted tough times ahead.

“If you put up the price, it becomes less affordable. It means that more people can’t pay, it means more theft, and more arrear debt by municipalities,” he said.

Future of Eskom

Efficient Group chief economist Dawie Roodt said the only solution for South Africa’s electricity crisis was to put Eskom into business rescue. In an interview with 702, Roodt said gradually privatising the power utility was not the answer.

“Our economy cannot grow faster than 1.5% if we are lucky. The population is growing at 1.5%. We have unemployment levels of nearly 50%. We have rising levels of poverty in South Africa,” he said.

“We are heading for a disaster. This is a crisis. We have to understand this, and we have to act.”