Eskom request for increase of 32% slammed

ESKOM recently applied to the National Energy Regulator of South Africa (Nersa) to increase electricity tariffs by 32% from April 1 for the 2023/2024 fiscus.

Experts say, if granted, the impact will be disastrous for an already ailing economy and lead to the closure of more businesses.

According to Eskom, the tariff increase is to cover depreciation due to an incorrect asset valuation by the energy regulator, increases in diesel and fuel oil prices, and the cost implications for independent power producers.

The last increase granted to the national power utility was 9.61% for 2022, although Eskom had applied for a 20.5% increase, according to Business Tech.

Palesa Phili, the CEO of the Durban Chamber of Commerce and Industry NPC, said an increase in tariffs would put added pressure on the economy and businesses.

“Consumers are faced with rising interest rates and fuel prices increasing the cost of living. The tariff hike has the potential to threaten the financial stability of many businesses and households, lowering disposable income and cash reserves.”

She said the most vulnerable sector to the tariff increases would be the manufacturing sector.

“The Durban Chamber of Commerce and Industry’s membership consists of some of the country's largest manufacturers, and excessive tariff increases will be detrimental to their operations and a drain on their ability to grow and create jobs. Many of these plants run 24-hour production operations and are heavily dependent on electricity.”

Phili said load shedding was resulting in loss of productivity, revenue losses, and unplanned operational expenditure across industries and their value chains.

“The Durban Chamber of Commerce and Industry believes excessive tariff increases will cause consumers and business users to consider alternate sources of energy such as solar panels and plants. This means they will not be dependent on the power utility to generate energy, making it more cost-effective and stable.

“As organised business, we believe the tariff hike is unreasonable. We encourage Nersa to evaluate the application and its economic consequences on the country's economy.”

Solly Suleman, the president of the Minara Chamber of Commerce, said a further increase in tariffs would lead to the closure of businesses and struggling households. “We have a no-win situation with respect to Eskom. Householders are struggling and ultimately many will default on their electricity bills and find illegal means to draw electricity.

“Load shedding is destroying homes and businesses and we now have a vicious cycle. Electricity consumption drops, revenue drops and Eskom then increases tariffs unreasonably to meet their budgets which in turn further impacts on utilisation.”

Melanie Veness, the CEO of the Pietermaritzburg and Midlands Chamber of Business, said: “For Eskom to apply for an increase of 32% on electricity tariffs is ludicrous. From 2007 to 2021, electricity tariffs increased by 753%, while inflation over this period was 134%.

“Eskom finds itself in this situation because of corruption and mismanagement. The private sector cannot be expected to carry the consequences of this mismanagement. We are already being unfairly prejudiced by unprecedented levels of load shedding and now we’re also expected to carry the costs as well. No way!

“Eskom is making electricity completely unaffordable and our trading environment progressively more unattractive and they’re eroding their own customer base. It’s not sustainable. How can we possibly attract investors and create jobs under these circumstances? How can we even retain them?”

David Hallowes, an energy expert from GroundWork, said Eskom's debt was unpayable and municipal increases would soon follow should the 32% increase be approved by Nersa.

“eThekwini’s tariff is now R2.24. If it increases by 32%, it will become R2.96. This means a household consuming 400 kWh (kilowatt-hour) per month would pay R1184 for electricity.

“Eskom’s debt is now becoming the people’s debt. This as we live in a country where 60% of people are considered poor and are already struggling. South Africans, especially the poor, cannot afford this. Eskom wants people to pay for its choices without consulting them.”

He said businesses had the means to source power from independent power producers instead of relying on Eskom.

“We call on the establishment of community-based generation of solar panels for those who cannot afford this alternate source of energy. People need a cheap and secure source of power and many cannot afford solar panels on an individual basis.”

Hallowes said clean and safe energy was now essential to energy justice and called for 200 kWh of free basic electricity for households.