Nersa tariff hike 'poses risks to the country’s economy and all municipalities': Salga

South African Local Government Association (Salga) believes the electricity tariff hike which National Energy Regulator of SA (Nersa) granted Eskom on Thursday is “high and above the cost of living, which will negatively impact on hard-pressed small and big business, as well as normal South African citizens”.

“South Africans must eventually pay for these increases through a pass-through tariff from municipalities. The decision still poses risks to the country’s economy and to all municipalities,” Salga said in a statement on Thursday.

“Municipalities are already facing fundamental changes and transition within the energy sector, and coupled with many being cash-strapped, losing customers, record high non-payment rates due to ever increasing electricity prices, unemployment and the non- growing economy, the increase places increasing pressure on municipalities’ financial sustainability.”

Nersa announced on Thursday that South Africans will pay 9.41% more for electricity in 2019/20, 8.1% for 2020/21 and 5.22% for 2021/22. Eskom had applied for hikes of 17.1% for 2019/20, 15.4% for 2020/21 and 15.5% for 2021/22.

Salga said the 9.41%, along with the existing Nersa decision on the Regulatory Clearing Accounts for 2014/15, 2015/16 and 2016/17 financial years, which allowed Eskom to increase tariffs by 4.4%, effectively allowed the power utility a 13.8% increase. 

“Nersa’s decision is effectively allowing Eskom a total 13.8% increase on electricity tariffs in the financial year 2019/20. This is more than double the current inflation rate and unaffordable for both customers and municipalities.”

Nersa said tariff increase impacts on the bottom line as revenue collection depends on customers’ response to prices.  

“This is evidenced in the decline of municipal electricity sales, the rise in non-technical losses, and increasing number of customers resorting to alternative energy options with the intention to be independent of municipal supply and grids.”

Johannesburg mayor Herman Mashaba said the Nersa  increase was “simply unacceptable”.

“Given the poor state of the national economy and the massive corruption at Eskom itself, the city, on the behalf of our residents, had argued that the proposed tariff increases were simply unacceptable.”