Eskom’s massive price hikes heading to parliament
South Africa’s parliament will debate a proposal from the nation’s state-owned energy utility that could see electricity tariffs rise as much as 40% next year, according to the Democratic Alliance party.
The party said that National Assembly Speaker Thoko Didiza confirmed officials would discuss the legality of the energy regulator’s decision to allow Eskom to add an R8 billion “make-up tariff” next year.
According to leaked draft documents seen by the Daily Maverick in June, 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 apply to Eskom direct customers, with customers powered by local municipalities facing even higher rate 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 announced earlier in August that Eskom would be allowed to recover over R8 billion through the RCA from the 2021/22 financial year.
Eskom applied for an RCA of R23.9 billion for the year, but the regulator approved just under R8.1 billion, adjusting R15.8 billion out of the application.
The RCA is an account in South Africa’s current electricity tariff methodology that contains a balance between the actuals for Eskom’s full financial year and what Nersa allowed for that year.
Under the MYPD methodology, Nersa allows Eskom to apply for future tariff hikes based on the costs of its operations as well as projected revenues from sales.
The RCA monitors and tracks uncontrollable costs and revenues assumed in Nersa-approved tariff hikes and compares them to the actual costs and revenues incurred by Eskom.
Even with Nersa nixing R16 billion from Eskom’s application, the R8 billion recovery would still translate to a 4% tariff hike on top of whatever hike is granted for 2025. If the draft proposals become official applications, the possible 36.15% hike could push above 40%.
It must be noted that Nersa has issued a statement clarifying that no official applications have been made for 2025, 2026 and 2027 as yet.
However, there is no escaping the fact that massive price hikes are coming—Eskom is entitled to R69 billion from the RCA due to a previous court ruling against Nersa, where the regulator excluded the amount and now has to put it back in the equation.
The first R23 billion was added to the 2021/22 RCA for next year’s hikes.
Eskom has applied for only a R9 million clawback in the RCA for 2022/23, but this does not include the second R23 billion tranche.
A third R23 billion tranche could be due in the 2023/24 RCA, meaning even higher hikes in the medium term.
The reported hikes sparked an immediate backlash from electricity users and various stakeholders, which has led to the coming debate in Parliament.
Electricity prices have roughly tripled in South Africa over the past 14 years, even as sustained power cuts in Africa’s most industrialised economy stagnated growth.
“The potential impact of a 40% electricity tariff increase is horrendous for South Africans already struggling under a cost of living crisis,” Kevin Mileham, a DA member of parliament, said in the statement.
“If the regulator grants Eskom’s request, the population will be forced to choose between buying food and making electricity payments,” he added.
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