Electricity prices to go up even more than expected

The Organisation Undoing Tax Abuse (OUTA) believes that Eskom has not done its homework in projecting its revenue, and therefore should not be allowed to claw back these shortfalls from customers when failing to achieve its unrealistic forecasts. The organisation reacted after the National Energy Regulator of South Africa (NERSA) approved Eskom’s application to recover another R13,3- billion from electricity users over the next two years. The amount translates to an additional 3% per annum increase on electricity prices on top of the 9% per year already approved last year. Eskom applied to claw back R27,3-billion from electricity customers through power tariffs to cover costs incurred for the financial year 2018/19.

“We find it unacceptable that NERSA approved a 6,5% increase to Eskom to be implemented over the next two years without providing reasonable explanation to the public. Society needs rational reasons to prevent them from questioning NERSA’s decisions.  This could open the regulator up for possible unnecessary legal challenges, which the taxpayer will have to pay for again,” said Liz McDaid, Energy Portfolio Manager for OUTA.

OUTA made submissions to NERSA earlier this year, challenging the tariff increases. “We see that NERSA has listened to the public and disallowed more than half of the revenue Eskom wanted. It also has not allowed Eskom to claim most of the money it wanted to refund it for its use of expensive diesel peaking power plants. However, if Eskom had managed its operations effectively, it would have kept up its maintenance.  This didn’t happen, and customers should not have to pay for Eskom’s bad management,” McDaid added.

While NERSA says they took civil society submissions into account before granting this additional increase, the regulator fails to provide reasons for the decision. We believe it is essential that NERSA provides rational explanations and feedback for their decisions, if indeed they want civil society to understand and have faith in their work.   
 

South Africa is witnessing a significant impact on the economy due to the lockdown and Covid-19 pandemic, and OUTA believes fewer people will be able to pay for electricity in future. “Businesses are closing, and people are losing their jobs as a result of the lockdown, yet Eskom and NERSA find reasons to push up prices without reasonable explanation to society. We find this unacceptable,” said Julius Kleynhans, Strategy and Business Development Executive at OUTA.

OUTA looks forward to see how NERSA made their decision.  It is also not clear when the 6.5% increase will come into play.  

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