The National Energy Regulator of South Africa's (Nersa) decision to grant Eskom a 9.1% hike in the electricity price in the 2022/23 financial year will be a financial blow for battling consumers and businesses.
This is despite the fact that the price hike is substantially less than the double-digit increase Eskom had sought and which may yet be subject to legal action as the parastatal mulls the implication to its operations.
Eskom CFO Calib Cassim said the state-owned enterprise needed to further understand the implications that Thursday’s tariff announcement would have on the parastatal’s long-term sustainability.
However, according to Nersa, it had taken thousands of consumers’ concerns about affordability into account in making its latest price determination.
“Eskom’s 2022/23 revenue application was R279bn, excluding RCAs (regulatory clearing account),” the Regulator said.
“Nersa’s approved allowable revenue is R250bn after considering adjustments for inefficiencies. Eskom’s application was 14.58% and Nersa has approved 3.49%, excluding RCAs.
“Nersa has approved a tariff of 133.64c/kWh for 2021/22 and 146.48c/kWh for 2022/23, which results in an increase of 9.61%.”
Nersa said Eskom’s allowable revenues of R293bn as applied for, previously approved RCAs of R14.4bn, and adjustments of R28bn for inefficiencies, had resulted in R250bn allowable revenues for 2022/23.
“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.
“The Regulator also conducted public hearings to solicit comments from interested and affected stakeholders.”
Nersa also said it had received more than 60 000 comments from private individuals, who all raised affordability concerns.
“Of these, 41 were substantive comments. It is important to note that Eskom’s revenue application for the 2022/23 financial year coincides with various economic and social issues currently affecting the South African economy. 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,” Nersa said.
Reacting to the decision, Eskom said the determination would allow Eskom to apply the adjusted price to customers from April 1.
“The financial implications of this decision on Eskom’s long-term sustainability will need to be further understood,” said Cassim.
“It is understood that Nersa considered the impact on consumers and the financial sustainability of Eskom as it made its decision.
“The Eskom Board will deliberate further before deciding on how to continue to sustainably provide electricity to the extent possible in the context of this revenue decision.
“In addition, Eskom keenly awaits the reasons for the decision that will provide further details on how the revenue determination was arrived at,” added Cassim.
DA Member of Parliament and spokesperson for mineral resources and energy, Kevin Mileham, said it was pleasing that Nersa had rejected Eskom’s “exorbitant” electricity tariff increase.
However, it was still a substantial increase for consumers.
“This increase, which may very well be challenged in court by Eskom, will still be a blow to South Africans who are already crippled by the skyrocketing cost of living.
“Fuel price increases, food and transport cost increases, consumer price increases, and all government tariffs are bombarding South Africans relentlessly,” said Mileham.
He warned that Eskom posed a big risk to the South African economy, due to its inability to maintain and grow generation capacity.
“With this unlikely to change in the foreseeable future, the government should put Eskom’s money to better use by opening up the sector to independent power producers. Much of Eskom’s losses can be traced back to mismanagement and rampant corruption under past leadership, and the burden is being passed on to consumers,” he said.
