Business, political parties and trade unions decry the energy regulator’s “tough decision” to let Eskom implement a 18.65% price hike for 2023/2024, saying it means hard-pressed consumers will pay more for electricity they did not get due to increased rolling blackouts.
They say the decision is not sustainable and will force business owners to look at alternative sources of energy as they contemplate getting off the grid to remain competitive amid the worst power cuts yet.
The National Energy Regulator of SA (Nersa) announced on Thursday its decision on Eskom tariffs for the next two years. It approved a 12.74% tariff increase for 2024/2025. The decision will allow Eskom to enable revenue of R318.9bn in 2023 and R352bn in 2024.
The 18.65% tariff increase for 2023/2024 is about 58% of the 32% increase the power utility applied for as part of its fifth multiyear price determination.
Eskom CFO Calib Cassim said: “Eskom notes the decision by Nersa. This decision will positively contribute from a financial and sustainability point of view.
“The revenue determination of R319bn and R352bn for the financial years 2024/2025 will allow a further migration towards a price level that reflects the efficient cost of producing electricity.”
In a statement on Friday, the Minerals Council SA said the latest, 18.65% and 12.74% tariff increases mean the mining industry’s electricity costs will increase R13.5bn, or 33.7%, to R53.5bn by end-2024.
Deeply concerning
It said that over the four years between 2021 and 2024 electricity tariffs would have increased 46% and electricity will make up about 12.5% of SA mining costs by the end of 2024 from about 9% now.
“These increases Nersa granted Eskom fundamentally shift the intermediary cost structures in mining. Due to the different electricity consumption densities of various mining commodities, the impact is not the same across the sector, but this is deeply concerning,” said Minerals Council chief economist Henk Langenhoven.
The higher cost of electricity means the share of energy in intermediary inputs will increase from 24% to 38% in gold mining, from 22% to 37% in iron ore mining, and from 13% to 19% in the platinum group metals (PGM) sector, the council said.
It said the increasing difficulty Eskom has in supplying the economy with electricity coupled with the tariff increases adds to the negative economic sentiment in SA while unemployment is at “a record high, and the country desperately needs urgent fundamental structural and regulatory reforms to stimulate the economy”.
Eskom announced last week that stage 6 load-shedding would continue until further notice. This was due to the severe capacity constraints after 11 generators — amounting to 5,084MW of capacity — suffered breakdowns .
Business Day has reported that manufacturing production fell in November, marking the first monthly decline in the country’s factory activity after four consecutive months of increases as sustained and intense power cuts continued to weigh on the sector.
Stats SA on Tuesday said manufacturing fell 1.1% from a year earlier, after a 1% rise in the previous month.
Off grid
Jonathan Shapiro, COO of Lesco Manufacturing, a company that manufactures and distributes a wide range of electrical products and accessories, told Business Day on Friday that the business “can’t absorb the 18.65% tariff increase”.
“We can’t pass it on to our customers, so this forces us to go solar and get off the grid, which we will do,” Shapiro said.
“We can’t be a competitive manufacturing company when our electricity has risen more than 500% in 10 years. We have to focus on our business, that’s what we can do.”
Solar PV Industry Association CEO Rethabile Melamu said, “Those that can afford solar systems need to seriously explore alternatives for a more stable and secure electricity supply.
“We continue to urge for the incentivisation of domestic systems to contribute to demand-side management efforts.”
Labour federation Cosatu described Nersa’s approval of the 18% tariff increase “insensitive and careless”.
“This will be a devastating blow to workers and businesses struggling to survive in an economy that is still reeling from Covid-19 lockdowns and rampant inflation,” Cosatu spokesperson Sizwe Pamla said.
Public service workers and those in the private sector had been demanding higher wages due to a sharp increase in fuel, electricity, transport and food costs.
Legalised robbery
“While this increase is less than the 32% hike Eskom requested, it will still be devastating for the unemployed and those who are dealing with wage stagnation. It will be a further burden to companies struggling to keep afloat because of a stagnant economy,” Pamla said.
“The continuous above-inflation increases that Eskom has received since 2006 are nothing [less] than legalised robbery of consumers. These increases only serve to pickpocket workers of their meagre wages, suffocate businesses and deny the economy the chance to reduce unemployment.”
Pamla blamed shoddy governance and poor management systems at Eskom for the ongoing crisis.
Outa, which made a formal submission to Nersa in September opposing Eskom’s price application, said the increase was unaffordable for most consumers. The organisation had wanted Nersa to grant a maximum of a consumer price index (CPI) tariff increase. “This increase is way beyond that and is unaffordable for most consumers,” it said.
Theuns du Buisson, economics researcher at the Solidarity Research Institute, said it was of the view that Nersa should pay more attention to applications from private power generators and less attention to Eskom’s applications for more expensive power.
“The time that Nersa spends every year to consider Eskom’s tariff increase application can be spent much better on policy review to allow new entrants to the power grid to supply their services. In the end, this is the only way SA would be able to emerge from the current energy crisis,” Du Buisson said.
DA’s public enterprises spokesperson Ghaleb Cachalia said, “South Africans are already stretched to breaking point due to a high cost of living, and this move by Nersa will force many to make the difficult choice of either putting food on the table or pay for nonexistent power supply from Eskom.”
Cachalia said the Nersa-Eskom raid on consumer’s empty pockets is “unfair, unjust and cruel because it is asking consumers to pay more for electricity that they don’t have”.
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