Friday is the deadline for written submissions on Eskom's proposed tariff increases.
It will be followed by what is likely to be a heated and even combative public consultation process which kicks off in the Western Cape on November 18 and finishes in Gauteng on December 4.
The power utility is asking the National Energy Regulator of South Africa (Nersa) to grant an increase of 36.15% for direct Eskom customers and a whopping 43.55% hike in municipal tariffs. The new rates are due to kick in on July 1 2025.
This is Eskom's largest percentage hike request and while Nersa does not historically grant anything close to what Eskom asks for, even a hike of half that would be a very bitter pill for consumers to swallow.
Years of load-shedding have herded those who can afford it into the arms of privately owned alternative power entities — mostly solar — meaning less income for Eskom.
Eskom argues that its current rates “no longer reflect the different services provided by Eskom” and that the “the evolving nature of the energy industry necessitates the modernisation of tariff structures”. It mentions the prevalence of customer-owned generation.
Years of load-shedding have herded those who can afford it into the arms of privately owned alternative power entities — mostly solar — meaning less income for Eskom. This migration by customers away from the power utility will likely increase over the next few years. Add to this Eskom's crippling debt and the ever-growing arrears by municipalities — now R75bn — and it becomes clear why Eskom is desperately trying to get its mitts on every rand it can.
But Nersa's role is to find a balance between what Eskom wants and what consumers, buried under a cost of living crisis, can afford.
Energy minister Kgosientsho Ramokgopa has labelled any hike above 20% “untenable” and says the government has to find a balance between Eskom’s revenue demands and reducing the financial strain on household incomes.
He says the government is evaluating responses to Eskom’s application and he is confident “we can provide some degree of relief”.
“The choices we are making all have consequences. But one thing we know is if the current tariff application is approved as is, our businesses will be uncompetitive. A lot of households will not be able to afford this.”
The recently improved power supply — the country celebrated 200 days of no load-shedding two weeks ago — is helping to slowly improve the economy. But there is a long way to go. Higher tariffs will slow growth further and stymie investment. Politically, inflated increases will also negatively affect the ruling party at the polls.
Eskom is a bloated behemoth. For years it has survived on bailouts from the Treasury. Transforming it into a viable entity requires a complete strategic overhaul. Piling the pressure on consumers every year is not a solution.
The SOE has already undergone some important restructuring, including separation into three divisions — generation, transmission and distribution. The government needs to keep its foot on the pedal, block out the noise from those who have their agendas and push through on its plan to reshape Eskom into a modern, streamlined entity that can guide South Africa into the next decade of power generation, and far beyond. It is a massive undertaking, but vital for boosting the country’s economy in any meaningful way.
Nersa is expected to decide on the tariff increases by mid-March. The outcome will significantly indicate the path South Africa is taking.
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