Big storm brewing over Eskom price hikes in South Africa

The Democratic Alliance (DA) says it wants to take the fight against planned double-digit price hikes over the next two years to parliament and open a national debate on the rising cost of electricity in South Africa.

The party’s spokesperson on Electricity and Energy, Kevin Mileham, said he as written to the Speaker of the National Assembly, Thoko Didiza, requesting that Parliament holds a debate on Eskom’s electricity pricing.

Citing a leaked document on Eskom’s planned tariff hikes for 2025, 2026 and 2027, Mileham said that electricity pricing is becoming unaffordable and has reached crisis levels.

The leaked documents, seen and reported on by Daily Maverick, showed that Eskom would be seeking massive tariff hikes over the next three financial years:

• 2025/2026: 36.15%
• 2026/2027: 11.81%
• 2027/2028: 9.1%

These tariffs would reportedly apply to Eskom direct customers, with customers powered by local municipalities facing even higher rates hikes.

Notably, these increases do not include the additional amounts that energy regulator Nersa will allow the utility to ‘claw back’ from the Regulatory Clearing Account (RCA).

Nersa on Friday (2 August) announced that Eskom would be allowed to recover over R8 billion through the RCA from the 2021/22 financial year.

Mileham said this would translate to a 4% tariff hike on top of the possible 36.15% application for 2025.

Notably, even though Eskom has only applied for a R9 million clawback in the RCA for 2022/23, this does not include a potential R23 billion Eskom is entitled to from a previous court ruling against Nersa. Another R23 billion could be due in 2026 from the 2023/24 RCA.

Mileham said that continued double-digit price hikes “will effectively price many households out of the electricity market and increase energy poverty to levels not seen since the dawn of democracy”.

“According to the South Africa Reserve Bank, between 2007 and 2022, the average Eskom tariff increased by 450% while inflation increased by only 129% over the same period. What this means is that electricity tariffs have quadrupled in real money terms in 14 years,” he said.

“Electricity tariffs have reached crisis levels, and there is now a real risk that South African households could become trapped in a permanent high cost of living environment due to sky-high electricity prices.”

This is a growing crisis in South Africa that the Department of Energy and Electricity has acknowledged.

In late July, Minister of Energy and Electricity Kgosientsho Ramokgopa said that electricity tariffs are increasing exponentially, and people can no longer afford electricity.

He said the rate at which Eskom tariffs and municipal tariffs are increasing is unsustainable, describing it as “an untenable situation”.

“We are getting to a situation where your lower-to middle class – even your public servants – can no longer afford the cost of electricity in this country,” he said.

“So as we speak now, it’s an affordability question; over a period of time, if you don’t address it, it’s a national security problem. Because people are ‘not going to just fold their arms’.”

Higher electricity prices also have inflationary pressure, which impacts the cost of goods and the cost of doing business.

“This is a problem that is likely to become acute over a period of time, and needs to be addressed urgently,” he said.

Ramokgopa said last week that the department and the South African Local Government Association (SALGA) are looking at ways to implement an electricity pricing plan in collaboration with Eskom and local municipalities.

Mileham said this is a positive development but urged the government to move with speed.

“The Eskom monopoly has become inefficient, and the cost of that inefficiency is now being passed on to consumers. It does not help that the current electricity pricing policy is more biased towards setting tariffs that reward Eskom inefficiency while failing to balance this with consumer affordability,” he said.

Read: Eskom price hikes are wrecking South African households