ESKOM’S PROPOSED PRICE INCREASE: UNAFFORDABLE AT 232.63C/KWH
Should Eskom’s excessive price increases become a reality, it will push electricity into the realm of a luxury item, not only for many households, but also for businesses and institutions.
Setting Eskom’s price increase usually involves a determined battle between the utility and the National Energy Regulator (NERSA), a disgruntled public commenting on the sidelines, and a decision that pleases nobody. OUTA calls on the public to do things differently this year: let’s all comment on Eskom’s application (we’ll show you where). As Wayne Duvenage pointed out in this month’s CEO letter, we should stop grumbling quietly and start demanding change, and while OUTA will once again lead the way in fighting this ludicrous increase on your behalf, we will need you to get involved in raising your voice against a proposed electricity price increase of 38%. Just think what effect such a price hike will have on your pocket (and our economy) if we don’t speak up.
This year Eskom is in a worse situation than ever before. The issues are more extreme. The price increase could be 38.1% if Eskom gets its way. The proposed tariffs which Eskom published this week underline how the increase will be applied in a restructured tariff model, including a move towards fixed generation capacity charges and variable time-of-use charges.
This year, we would like to see NERSA overseeing a process that aims for a better outcome.
The Eskom application: 38.1% increase to 202.29c/kWh
NERSA says Eskom’s application, plus three additional amounts since it was filed, could result in a price of 202.29c per kilowatt hour (c/kWh), an increase of 38.10% up on the current price.
Eskom applied for a total allowable revenue of R334.676 billion for 2023/24, which includes R317.696bn to be raised from standard tariff customers (everyone except the big customers with negotiated price agreements). The price is calculated from the allowable revenue and the predicted energy sales.
Eskom’s application was filed in June 2021 and NERSA says that up to three further amounts, which are not in that application, may be added to the allowable revenue:
• R346.1bn for the Regulatory Clearing Account (RCA) extra revenue for 2019/20 which NERSA has approved but has yet to decide onto which years it will be loaded;
• R10.645bn for the RCA extra revenue for 2020/21, which Eskom has applied for but NERSA has not yet processed;
• R15bn, ordered by the high court in June 2022, as the first of four payments to refund Eskom for the government bailout which NERSA previously deducted from the price increase sought.
Should all of those amounts be included, the 2023/24 allowable revenue for standard tariff customers would be R346.802bn, giving an average price of 202.29c/kWh.
This price excludes VAT, which is added to all the tariffs, and would take the price to 232.63c/kWh.
In addition, it has been reported that Eskom has indicated that President Ramaphosa’s new energy plan, which includes additional power purchases, more maintenance and more skilled personnel, will require that Eskom will have to adjust this application to ask for additional increases.
Should these excessive price increases become a reality, it will push electricity into the realm of a luxury item, not only for many households, but also for businesses and institutions.
OUTA’s initial comment
OUTA believes there is no silver bullet to Eskom’s financial woes, least of all through continued prices increases way beyond the inflation rate.
Customers cannot bear the full cost of Eskom’s unsustainable business model through massive increases in the price of electricity. This increase goes way beyond the levels of affordability for almost all customers – domestic, commercial, industrial, mining and agricultural – and has little consideration for the severe socio-economic consequences of such an increase.
OUTA is also concerned that NERSA pays lip service to process of public consultation.
OUTA has repeatedly participated in many of the previous Eskom pricing public consultation processes, opposing high increases with meaningful justifications for our position, yet our inputs and that of other submissions appear to be ignored. We have subsequently requested a meeting with NERSA, to engage around the tariff structures. OUTA will also make a submission to NERSA on this price application.
We would like to see innovative solutions to Eskom’s costs, particularly as consumers are fed up with having to pay the penalty for state capture and failed entities.
We would also like to see NERSA holding government to account for decisions affecting the electricity price which are beyond Eskom’s control. An example here is the Department of Mineral Resources and Energy, which sets the prices for independent power producers (IPPs).
OUTA urges the public to consider this application and comment on it to NERSA.
We also call on NERSA to listen carefully to public inputs.
NERSA’s deadlines are:
• 8 September: Deadline for written submissions, to email@example.com
• 19-23 September: Public hearings (online).
• 7 November: NERSA decision on the application.
• 1 April 2023: Implementation of price increase.
OUTA will be preparing a submission which we will share with you and which you will be able to use to write your own submission if you wish, or you could support our submission.