Civil group slams proposed electricity tariff increase

A PROPOSAL to hike the electricity tariff by 38.10% in the 2023/2024 financial year has been slammed by the Southern African Faith Communities’ Environment Institute (SAFCEI).

Despite rolling blackouts with South Africans being subjected to at least two power outages a day, Eskom has submitted a proposal to the National Energy Regulator (Nersa) as part of its next Multi-year Price Determination (MYPD) revenue application.

The power utility has applied for a 32% tariff increase from April 1, 2023.

SAFCEI has submitted written and oral objections to the application arguing that cash strapped South Africans were battling with double-digit increases. This comes on the back of a strong call for the methodology used to determine the electricity tariff to be revised, with the business community and civil society turning to the courts.

Nersa has until December 24 to make a final decision on the matter.

SAFCEI executive director Francesca de Gasparis said Eskom’s tariffs increases continued to be far above inflation and (social) grant increases.

“These double-digit electricity tariff increases will have a huge impact. And yet the issues that make our energy system unaffordable, unreliable and unsafe – loadshedding, year-on-year double-digit percentage rises in electricity tariffs, and poor energy planning – all stem from the government’s lack of action to deal with mismanagement and corruption,” De Gasparis said.

He said Nersa had so far failed to shield citizens from unaffordable prices in spite of civil society’s calls for the revision of the methodology.

“And while Nersa did manage to reduce last year’s increase request from 20.5% to 9.61%, it seems that Eskom is back for the shortfall, even though it is the root cause of its own problems.

“Eskom is a state-owned entity, not a private company – the government is its only shareholder – and it should be implementing government policy.

This is what makes Nersa’s inability to enact the changes needed for a secure and affordable energy system and to initiate actions to address the tariff impacts on people with low incomes so frustrating,” said De Gasparis.

An energy expert who tracks the methodology for SAFCEI, Kim Kruyshaar said relying on the MYPD methodology was no longer a fit or fair model on which to base future electricity tariffs. Kruyshaar said this was due to Eskom’s generation fleet being unreliable, coupled with the huge debt burden.

“Eskom’s debt burden reduces its options for new generation, which affects production efficiency. However, despite our appeals each year, neither the process nor the methodology has changed and, as a result, we still see tariff increases that are far higher than inflation rates,” Kruyshaar said.

Eskom gave reasons for wanting such a steep price increase.

“The key contributors include depreciation of 10.67% – due mainly to an incorrect regulatory asset base valuation by Nersa in its 2023 financial year decision.

“Eskom’s primary energy of 7.85% (of which the majority, 6.09% is due only to increase in diesel and fuel oil prices as well as volume increase in OCGT fuel) and Independent Power Producers’ cost increase of 9.05% (due to further energy being sourced from IPPS including emergency procurement),” said Eskom general manager for regulation Hasha Tlhotlhalemanje.

He said the total revenue as applied for in June 2021 of R335bn for the 2024 financial year and R365bn for the 2021 financial year remained the same.