Salga, IFP, Mpho Phalatse join chorus condemning Eskom price hike

Voices condemning the Eskom tariff hike are growing as South Africans are subjected to ever-increasing rolling blackouts.

The South African Local Government Association (Salga), the Inkatha Freedom Party (IFP) and Johannesburg mayor Mpho Phalatse have added their voices to those outraged by the National Energy Regulator of SA's (Nersa) decision to grant Eskom electricity price increases of 18.65% in the fiscal year 2023—2024 and 12.74% in 2024—25.

Salga said that “as the national voice of South Africa's 257 municipalities” it noted Nersa’s decision with “grave concern”.

“Though Salga appreciates the mandate Nersa has in setting the rules and rates for electricity generation, transmission and distribution, the ongoing increases in electricity prices while Eskom continues to face a shortage of generation capacity will have a continuing negative impact on municipalities, consumers and businesses,” it said.

“The tariff amounts to a 33% increase over the next two years. Effectively, this is the increase Eskom asked for and is more than eight times inflation. It comes at a time of stage 6 load-shedding, meaning we have no power for eight hours out of 24 — a third of the day. 

Salga said such an increase could only mean much hardship for customers across the board: domestic, commercial, mining, industrial and municipal.

“This will result in more nonpayment, theft, illegal connections and related technical losses, and will further worsen municipalities’ inability to pay Eskom.

“In an economy where we are likely to see weak growth with stagflation risks, high unemployment and high inflation, with rising prices and overall cost of living, consumers are cash-strapped and the hike is unaffordable,” it added.

The organisation said this was evident in consumer debt owed to municipalities: R289bn.

“Utility services are becoming increasingly unaffordable. All this is happening while municipalities are recovering from the Covid-19 pandemic which hit hard the ability of municipalities to collect revenue and service their debt.”

Salga said, in the current business model, municipalities buy bulk electricity from Eskom and onsell to customers at a mark-up.

“The fundamental question is: if Eskom cannot provide electricity to keep the lights on, what power are municipalities going to sell to consumers? And where will municipal revenues come from?  It is hard to see anything positive in all of this.”

Salga described the electricity model as “fundamentally flawed”.

It said it wanted an accelerated energy transition including legislative reforms that would enable municipalities to generate their own electricity and buy electricity from independent power producers (IPPs) to relieve pressure on Eskom and ensure energy security.

“The department of energy needs to get the renewable energy IPP programme running as this would pull down costs as tariffs for renewable energy such as solar and wind are decreasing. Every day we delay in getting the IPP programme running (or Eskom buying from its own IPPs), we are locking ourselves into the high-cost structure related to the coal plants since a lot of the costs stay the same, even when we are load-shedding. 

“The department of mineral resources & energy and energy needs to facilitate decreasing the cost structure by making it easier for Eskom and municipalities to procure renewables and bring down the total costs of electricity in the medium to longer term. We can’t afford these delays while we are sliding further into economic decline and electricity shortages.”

Salga believes “there is a lot of room for Eskom to be more efficient. For example, the coal contracts are not transparent, especially when buying coal from many coal suppliers. The skills within Eskom and the number of employees need to be looked at, including ongoing corruption that is crippling the pit. We would like to see transparent coal contracts and more information about Eskom’s capacity.”

The organisation said it had made submissions to Nersa last year urging the regulator to cap the tariff increases at “the inflation target set by the Reserve Bank”.

“We remain committed to this stance and implore Nersa to rethink. Its decision to grant Eskom’s electricity tariff application has effectively compensated the power utility for underperformance, which only widens the trust gap between Eskom, municipalities and their communities,” Nersa's statement reads. 

“The energy transition means a transition away from our current thinking into the thinking of the new world of electricity — which is far more complex than simply putting up prices.”

IFP spokesperson MP Mkhuleko Hlengwa described Nersa's decision as “irrational and unreasonable”. He urged the energy regulator to reconsider.

“South African consumers cannot take yet another body blow, as millions are already struggling to pay their bills and put food on the table,” he said.

“In addition, SMMEs — without the purchasing power of the bigger corporates — are suffering and collapsing. Not only will this price hike push many to breaking point, but when businesses are forced to close, employees are left without an income, or the means to take care of their families,” he said.

“Eskom has clearly shown itself unable to provide a stable energy supply, with the country now at stage 6 for the foreseeable future. Why then are beleaguered consumers being forced to pay more for a sub-par service? This amounts to nothing more than consumer bullying.

“Time and again, Eskom demands bailouts or price hikes to ‘keep the lights on’, yet here we are, in the dark. Any additional monies for electricity generation should instead be funnelled towards alternative energy suppliers so that the country and its people can once and for all be free of the millstone around their neck that is Eskom.”

Phalatse and Johannesburg mayoral committee member for environment & infrastructure Michael Sun expressed the city’s concern.

“The Johannesburg multiparty government is concerned about the impact that the 18.65% tariff increase will have on the residents of the city,” they said.

“Residents across the city will regrettably be forced to pay for years of political negligence and corruption. Eskom originally requested a 38.1% increase during the public consultation process and we objected based on logical and factual grounds.

“The objections were necessary, as any increase was going to have a devastating impact on Joburg residents who are already buckling under growing inflation, an ailing economy, high fuel and food prices, and persistent rolling blackouts caused by Eskom's unreliability.”

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