Date: 29th September 2024, Sunday
Author: Quinz Atdah Qeqe
Country: South Africa
Source: Getty Images
SUMMARY
The National Energy Regulator of South Africa(NERSA) recently published a consultation paper for public comment which detailed Eskom’s recent revenue application and proposed 36% electricity tariff hike for the 2026 – 2028 financial years (Wicks, 2024). This after a leak in Eskom’s draft revenue application for a proposed 36% electricity tariff increase was reported by the Daily Maverick (Mahlaka, 2024). Eskom’s intended 36% tariff hike would be aimed at consolidating it’s revenue from previous fiscal years and strengthening it’s capacity to generate and supply electricity in the long run. Citizens took to the streets in a Democratic Alliance(DA) led national protest on the 18th September 2024 against the lofty hikes; protesters condemned the tariff hike saying that the electricity price hike would further fuel the already inflated costs of living. Members of Parliament(MP) from different political parties recently gathered in a much anticipated debate around Eskom’s proposed tariff hike. Political parties such as ActionSA, the Economic Freedom Fighters(EFF), the African National Congress(ANC) and the DA were all in solidarity in their opposition of Eskom’s proposed tariff hike (Herald, 2024). Eskom’s revenue application and proposed tariff increase is currently in the initial stages of NERSA’s processes. The deadline for public comment on NERSA published consultation paper is the 1st of November 2024, citizens and all concerned stakeholders have been urged to participate in this process.
BACKGROUND
In a Daily Maverick report dated June 20th, the state owned entity(SOE) and South Africa’s largest electricity utility Eskom had allegedly complied a documented revenue application with a detailed request for an over 36% electricity tariff increase to the National Energy Regulator of South Africa(NERSA) (Mahlaka, 2024).
The detailed application included NERSA’s prescribed pricing methodology the Multi Year Pricing Determination(MYPD) which is ultimately used to determine the amount of revenue a energy utility such as Eskom could request for upcoming financial years. Other pricing guidelines including the MYPD prescribed by NERSA would ultimately establish the percentage in tariff price increases in which an energy utility could implement for a fiscal year(NERSA, 2024).
In light of this, NERSA on the 23rd September 2024 published in a public consultation paper Eskom’s confirmed MYPD 6 revenue application for the 2026 – 2028 (1 April 2025 – 31 March 2028) financial years (ESKOM, 2024).
The published consultation paper detailed Eskom’s MYPD for total revenue collection of R446 billion in 2026, R495 billion in 2027 and R537 billion in 2028, these determined figures would ultimately translate into electricity price hikes of 36,15% in 2026, 11, 8% in 2027 and 9. 10% in 2028 (Moodley, 20204). Notably, NERSA is obligated to allow for a total recovery of supply costs and sufficient return on money to energy utilities which efficiently supply energy, this would include the cost in operations, remunerations, total supply, depreciation and maintenance of assets.
Eskom has in recent years been overwhelmed in financial and operational woes which have hindered its ability to efficiently supply consistent bulk electricity. The SOE highlighted that about 10% of the 36% proposed tariff hike for 2026 is due to previous MYPD application decisions by NERSA to approve of lower percentages in revenue than was requested. Thus, the power utility’s MYPD revenue application for the 2026 – 2028 financial years seeks to consolidate the losses from the past fiscal years where the cost of supply greatly deviated from the cost of tariff pricing (Hlakudi, 2024). Ultimately, Eskom’s lofty revenue application and 36% proposed tariff hike is determined by its financial plan to bolster for a cost reflective tariff which would coincide with its operational cost, harness for greater financial sustainability and fuel its ability to efficiently generate and supply bulk electricity in the long term.
Eskom’s proposed tariff hike has received much backlash from citizens this as the DA had recently garnered over 100 000 signatures in a petition opposing the proposed tariff price hike. On the 18th September 2024, citizens took to the streets in a DA led national protest against Eskom’s lofty tariff hike, calling for urgent review in the electricity sector structure (Nkadimeng, 2024).
In a recent parliamentary debate on Thursday 19th September 2024, Members of Parliament(MP) from different political parties gathered in a much anticipated debate around Eskom’s proposed tariff hike. MP’s from parties such as ActionSA, the Economic Freedom Fighters(EFF), the African National Congress(ANC) and the Democratic Alliance (DA) were all in solidarity in their opposition of the proposed tariff hike. ActionSA MP Malebo Kobe, rejected the tariff hike saying “These combined increases will further devastate already struggling households, making basic electricity an unaffordable luxury for millions” (Herald, 2024).
The proposed 36% tariff hike far exceeds South Africa’s current inflation rate of 4.4%. According to Africa Economist Yvonne Mhango at Bloomberg Economics, “Electricity prices and other fuels account for 3.7% of South Africa’s inflation basket, “but an outsized increase in tariffs means it can have a significant impact on inflation” (TechCentral, 2024). With the high outlook in inflation coupled with the potential electricity tariff price hikes consumers in the long run could potentially face challenges in their ability to sustain their households, additionally the proposed tariff hike could threaten the current living conditions of many low income South Africans.
Currently, Eskom’s revenue application and proposed tariff hike is in the initial stages of NERSA’s processes. NERSA’s recently published consultation paper on Eskom’s application forms part of the public participation processes and constitutes the 1st in a number of public participation engagements to come. The deadline for public comment is the 1st of November 2024, citizens and all concerned stakeholders have been urged to participate in this process.
REFERENCES
1. BusinessTech, 2024. Eskom Tables Massive 2025 Electricity Price Hike For South Africa. September 24th. https://businesstech.co.za/news/energy/792173/eskom-tables-massive-2025-electricity-price-hike-for-south-africa/. Date Of Access: 27th September 2024
2. ESKOM. 2024. The National Energy Regulator Of South Africa (NERSA) Publishes Eskom’s Revenue Application For The Next Three Financial Years (FY 2026 To 2028). https://www.eskom.co.za/the-national-energy-regulator-of-south-africa-nersa-publishes-eskoms-revenue-application-for-the-next-three-financial-years-fy-2026-to-2028/. Date Of Access: 27th September 2024
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6. 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-increasein-electricity-tariffs-of-up-to-44-next-year/. Date of access: 23rd August 2024
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13. Wicks, B. 2024. Eskom’s Proposed 36% Electricity Tariff Hike Open For Public Comment. EyeWitness News. September 24th. https://www.ewn.co.za/2024/09/24/eskoms-proposed-36-electricity-tariff-hike-open-for-public-comment. Date Of Access: 27th September 2024
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