South African consumers will be paying a cumulative 33.8% more for electricity consumption over the next two years after the energy regulator granted Eskom its tariff hike application, in spite of floundering energy supply.
The National Energy Regulator of South Africa (Nersa) yesterday granted Eskom a 18.65% electricity tariff increase for the 2023/24 financial year starting on 1 April, and 12.74% for 2024/2025 financial year.
Nersa announced its decision on Eskom’s Fifth Multi-Year Price Determination (MYPD5) allowable revenue application for the 2023/24 and 2024/25 financial years.
Eskom’s application for the 2023/24 financial year’s revenue was R351 billion, including Regulatory Clearing Accounts (RCAs) and court orders.
However, the regulator approved allowable revenue of R318bn after considering adjustments for inefficiencies and prudency reviews.
For the 2023/24 financial year, Nersa approved a total revenue of R300bn, which translates to a tariff of 173.80c/kWh.
For the 2024/25 financial year, Eskom applied for revenue of R381bn, including RCAs and government injection, as per the court order.
However, the Nersa-approved revenue was R334bn for the 2024/25 financial year, which translates to a tariff of 195.95c/kWh.
Nersa chairperson Thembani Bukula said the energy regulator made its decisions after conducting the due regulatory process, which included publishing Eskom’s revenue application and inviting written comments from stakeholders.
“It is important to note that Eskom's revenue application for the 2023/24 and 2024/25 financial years was considered against various challenges that are affecting the South African economy,” Bukula said.
“Accordingly, the Energy Regulator’s decision provides a balance between the sustainability of Eskom and the economic well-being of the consumers and the economy.”
But Nersa’s decision did not go down well within the rest of the country which has been plagued by crippling power cuts of up to six hours per day with no electricity supply.
The Solidarity Research Institute (SRI) research last year showed that South African consumers already pay a premium of at least 27% on electricity from Eskom.
Trade union Solidarity said Nersa should pay more attention to applications from private power generators and less attention to Eskom’s applications for more expensive power.
SRI economics researcher Theuns du Buisson said Eskom’s increasing debt and its dropping power supply currently posed the single biggest threat to the economy.
“The time that Nersa spends every year to consider Eskom’s tariff increase application can be spent much better on policy review to allow new entrants to the power grid to supply their services. In the end, this is the only way South Africa would be able to emerge from the current energy crisis,” Buisson said.
“The false choice of either Eskom getting the tariff increase or of it being dependent on even more bailouts is being presented to South Africa on an ongoing basis, but the fact remains that we see both of these harmful concessions being made every year.”
The increase in electricity tariffs is also expected to have a ripple effect on consumer goods prices and affect the rate of inflation as retailers and other industries pass on the hike to end users.
Independent energy analyst Lungile Mashele placed the blame squarely on Nersa by kicking the can down the road and not granting Eskom proper tariff hikes for so many years previously.
Mashele said the result of these announced tariff hikes, coupled with the municipal tariffs yet to come in July, will be devastating for consumers and for the economy, to the large extent.
“We are going to a place where only people with money are going to afford electricity. That is very crude of me but this is the truth. Electricity is expensive, even for rich and middle-class people,” Mashele said.
“You’ve got people in this country who, due to the cost and availability of electricity, have found themselves having to go back to Primus-stoves or use paraffin or use alternative sources.
“Eskom says we are not getting electricity fully because it is not getting the money it costs to produce electricity. Eskom basically looks at their primary energy costs, which is coal and diesel, and they are saying they had budgeted R5bn on diesel.
“However, last year alone they spent more than R12bn and now that R7bn they have to recover it from somewhere or somebody, which is basically us.”
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