Fears that Eskom may not take 9.61% tariff increase ‘lying down’

THERE are concerns that Eskom might challenge the decision by the National Energy Regulator of South Africa (Nersa) to grant it a lower electricity tariff than it requested. The power utility on Thursday was granted an average standard tariff increase of 9.61% instead of the 20.5% Eskom had requested in its 2022/2023 revenue application.

Although the increase is less than what the power utility had requested, it is still 4.1 percentage points higher than inflation.

On Thursday, Nersa chairperson Nhlanhla Gumede announced that the regulator had approved Eskom’s allowable revenue for the year at R249.8billion.

That is R26.5bn less than the R276.3bn which Eskom had applied for.

The tariff goes up on April 1 for Eskom customers, and July 1 for municipal customers. Municipalities will also likely add a surcharge for their customers.

Eskom had made its Multi-Year Price Determination (MYPD) 5 revenue application to Nersa on June 2, 2021 for 2023 to 2025, in accordance with the prevailing Nersa methodology, as published in 2016. On September 30, 2021, the regulator rejected the application.

Eskom was required to make a new application based on a methodology yet to be published. Eskom successfully reviewed this regulator decision in the High Court with regards to the financial year 2023. The court provided

Nersa with a time frame to undertake its consultation, analysis and determination process. Nersa met the deadline set by the court.

Calib Cassim, Eskom’s chief financial officer said the financial implications of this decision on Eskom’s long-term sustainability will need to be further understood.

“It is understood that Nersa considered the impact on consumers and the financial sustainability of Eskom as it made its decision,” he said.

Eskom said its board would deliberate further before deciding on how to continue to sustainably provide electricity to the extent possible in the context of this revenue decision. Eskom also said the board keenly awaits the reasons for the decision that will provide further details on how the revenue determination was arrived at.

City of Cape Town Mayor Geordin Hill-Lewis said electricity tariff increases for City customers would be determined through the budget process and increases will come into effect from July 1.

“Our message to Nersa was simple: Capetonians simply cannot afford above-inflation increases in the cost of electricity. Such increases are unfair, unaffordable and unjust. This remains our view.

“Despite a 544% increase in the average price of electricity from 2007 to 2021, South Africans have seen a continued increase in load shedding and energy insecurity,” he said.

Hill-Lewis said the City was working towards bringing down the cost of electricity over time through its independent power producer (IPP) procurement project, which is under way.

“This project aims to allow the City to purchase electricity from IPPs at a rate far below Eskom’s, and pass this saving on to its customers. The project also aims to end load shedding in Cape Town over time,” he said.

Sandra Dickson from lobby group STOP CoCT, said Eskom’s response to the tariff increase spells more trouble.

“This may imply further court action or perhaps more load shedding. If Eskom’s previous actions are anything to go by, they will not take this lower tariff approved by Nersa, lying down.

“With the above-inflation tariff increase for Eskom and Eskom’s probable counter-action to this, consumers are still going to be on the short end by paying more for electricity and the possible threat of more load shedding from Eskom,” Dickson said.