Monday, 26th August 2024
Author: Quinz Atdah Qeqe
Country: South Africa
Source: Getty (Art Partner Images)
SUMMARY
In June 2024, it was established that the state-owned entity ESKOM drafted documents in an application for a massive electricity tariff increase from the National Energy Regulator Of South Africa (Nersa) of over 44% by 2025 (Mahlaka, 2024). The proposed increase in electricity tariffs would be directly charged from consumers in which ESKOM supplies with electricity. If the application for the 44% tariff increase were to be approved by Nersa, consumers would be likely to see the cost of electricity increase by as early as April/July 2025. According to numerous reports, ESKOM’s proposed electricity tariff hike could possibly have crippling financial effects on numerous consumers who are already affected by the inflated costs of living in South Africa. Parliament is set to debate ESKOM’s proposed application to Nersa for a 44% hike in electricity tariffs in addition to Nersa’s approval of ESKOM’s application for an R8 billion ‘make-up tariffs’ for 2025 (Changole, 2024).
BACKGROUND
According to an article released by the Daily Maverick on the 20th of June 2024, it was alleged that ESKOM had drafted documents dated May 2024 in which it planned on submitting to the National Energy Regulator Of South Africa (Nersa), which explicitly detailed a proposed increase in electricity tariffs, to assist ESKOM in generating revenue for the 2026 – 2028 financial years (Mahlaka, 2024).
ESKOM’s drafted documents were constituted in part of a possible application to Nersa requesting a nearly 44% increase in electricity tariffs to all its consumers by 2026. According to the documents, ESKOM would seek an increase of 36,15%(2026), 11.81%(2027) and 9.10%(2028) from non-municipal customers in tariffs, while municipal customers would be expected to pay an increase of 43.55%(2026), 3.36%(2027) and 11.07(2028) in tariffs (BusinessTech, 2024). If Nersa were to approve these proposed tariffs, customers would be likely to see these increased prices in electricity by as early as April and July 2025 respectively.
The proposed increase in tariff prices by ESKOM is established to be aimed at increasing its revenue to assist in its capacity to generate electricity as the main electricity utility in South Africa. The draft documents reflected ESKOM’s costs to generate, transmit and supply electricity to its customers, by this ESKOM aimed to demonstrate to Nersa its financial challenges in terms of the cost of generation to that of the potential revenue it receives.
ESKOM indicated that the delay in the implementation of the renewable energy transition and the fact that ESKOM is the main electricity utility in South Africa has placed much pressure on the entity, which has destabilized its operational and financial capacity to supply electricity, ultimately affecting its return on assets through revenue generation.
Upon the release of the proposed tariff increases, ESKOM has received much backlash from South African customers. Over 12,000 South Africans signed a petition by the Democratic Alliance (DA) in protest of the nearly 44% tariff increase (Democratic Alliance, 2024).
The price of electricity in South Africa has close to tripled in the past 14 years (Changole, 2024), the consistent inflation in the price of electricity coupled with the rise in the cost of living within South Africa has drastically affected middle to low earing households in the country.
The potential 44% electricity tariff increase proposed by ESKOM would further hamper on South Africans ability to sustain themselves and their households. According to the DA MP Mileham, the proposed tariff increase combined the R8 billion ‘make up tariff’ approved by Nersa, consumers would have to choose between buying food or buying electricity (Borotho, 2024).
Thoko Didiza the National Assembly Speaker has confirmed upon the DA’s request that Parliament debates ESKOM’s proposed tariff hike, in addition to tabling the legitimacy of Nersa approving ESKOM’s R8 billion ‘make-up tariffs’ for 2025 (Changole, 2024). If the nearly 44% electricity tariff hike were to be approved South African consumers who are currently tackling the high cost of living, would further have to dig deep into their pockets to keep their lights on in 2025.
REFERENCES
Borotho, M. 2024. Parliament To Debate Eskom’s Proposed Tariff Increases. Jacaranda FM. August 19th. https://www.jacarandafm.com/news/news/parliament-debate-eskoms-proposed-tariff-increases/. Date of access: 20th August 2024
BusinessTech. 2024. Eskom’s Massive Price Hikes Heading To Parliament. August 19th. https://businesstech.co.za/news/energy/787419/eskoms-massive-price-hikes-heading-to-parliament/. Date of access: 20th August 2024
Changole, A. 2024. Eskom’s 40% Price Hike Plan To Face MP’s Scrutiny. Tech Central. August 19th. https://techcentral.co.za/eskoms-40-price-hike-plan-face-scrutiny/249857/. Date of access: 20th August 2024
Changole, A. 2024. Parliament To Debate Eskom’s Energy Cost Hike Plan. Bloomberg. August 18th. https://www.moneyweb.co.za/news-fast-news/parliament-to-debate-eskoms-energy-cost-hike-plan/. Date of access: 20th August 2024
Getty Images. 2024. Hanging Light Bulbs With Light Switched On. https://www.gettyimages.com/photos/light-bulb. Date of access: 26th August 2024
Mhlaka, J. 2024. Eskom Wants An Increase In Electricity Tariffs Of Up To 44% Next Year. Daily Maverick. June 20th. https://www.dailymaverick.co.za/article/2024-06-20-eskom-wants-an-increase-in-electricity-tariffs-of-up-to-44-next-year/. Date of access: 23rd August 2024
Mileham, K. 2024. DA Petition Against Eskom’s Exorbitant Hikes Rapidly Surpasses 12,000 Signatures. DA News. August 19th. https://www.da.org.za/2024/08/da-petition-against-eskoms-exorbitant-hikes-rapidly-surpasses-12-000-signatures. Date of access: 20th August 2024
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