Why you should probably pay 38% more for Eskom power next year

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Civilian action group Outa says Eskom’s application to energy regulator Nersa for a 32% price increase in 2023 will eventually get closer to 38% if backlogs and court increases are taken into account.

This increase would be a slap in the face to consumers and businesses that continue to suffer from load shedding, which reached Stage 6 for the second time this weekend, with warnings of “unprecedented power outages” to come.

“As the country succumbs to phase 6 tax shedding, Eskom is coming back to the citizens of South Africa to ask for more money. It is outrageous that people are being asked to pay when services are not provided,” Outa said.

“Businesses, public services and households are significantly disrupted by the now routine tax shedding. Eskom seems to assume that electricity consumers are a captive audience from whom it can demand money without providing a service.”

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The group said Nersa should grant Eskom a maximum increase at the consumer price index (CPI) level.

“If the economy is to recover from Covid, electricity must be kept at an affordable level to be an economic factor,” it said. “Eskom’s business interests must not jeopardize economic recovery, and it is in Eskom’s best interest to grow the economy to grow electricity sales.”

Eskom has applied for a total allowable revenue of R334,676 billion for 2023/24. This includes R317,696 billion to be raised from customers with standard rates – that is, everyone but the major customers with negotiated price agreements.

The price is calculated on the basis of the permitted turnover and the predicted energy sales. Nersa said Eskom’s application, plus three additional amounts since its submission, could result in a price of 202.29 cents per kilowatt hour – a 38.10% increase from the current price.

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Outa said one of the major changes in Eskom’s latest application is an increase in its fixed monthly fees.

The group said it opposes this on the grounds that Eskom’s energy availability is low – so a flat fee is essentially billing households and other customers where the electric utility does not provide any services at all.

“This contradicts the principle of fairness,” Outa said.

“Given that Eskom’s target is only 72% availability, Outa proposes to reduce the fixed portion of each rate proposed by Eskom to a maximum of 72%, and adjust the revenue accordingly.”

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Outa said South Africans simply cannot afford more electricity price hikes.

The last increase awarded to the national electricity company was 9.61% for the year 2022. However, Eskom asked for a 20.5% increase.

Nersa has been trying to change its methodologies to determine what Eskom can include in its rate applications, but these have not yet been finalized. The regulator has faced legal challenges from Eskom over the methodologies.

Eskom is now looking for completely revised the tariff structure to better reflect costs and keep pace with the changing energy landscape. Until these matters are settled, however, both Nersa and Eskom will be using the old systems.


Read: Eskom wants to introduce a new ‘time-of-use’ rate for residential customers

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