Early indications are that there may be some mercy for struggling consumers when the National Energy Regulator of SA (Nersa) announces the annual increase in Eskom’s tariffs for each of the next three financial years.
The announcement, expected in the next week, is anxiously awaited by SA consumers struggling to afford the rapidly increasing cost of electricity.
If Eskom gets its way, its tariffs will increase by 36.15% in the next financial year, starting on April 1, followed by 11.81% in 2026/27 and 9.1% in 2027/28.
This has been widely rejected as unaffordable with minister of electricity & energy Kgosientsho Ramokgopa stating that even middle-class consumers, including civil servants, can no longer afford electricity.
Eskom’s application was discussed during a meeting of Nersa’s electricity subcommittee on January 21, which was open to the public. The committee made a recommendation to the energy regulator that will be considered next week.
It did not disclose the numbers in its recommendation, but it was clear from the discussion that the amounts Eskom applied for that reflect inefficiencies in the utility’s operations will not be allowed.
These include high maintenance costs at Eskom’s brand-new Medupi and Kusile power stations and the underutilisation of its generation fleet.
Eskom provided for its generation fleet to operate at an electricity availability level of 63% in the first application year, 64% in the next and 65% in the final year. In 2024 it was on average 59.8%.
The subcommittee however recommended that Nersa base its revenue allocation for Eskom on a 75% availability factor and limit the amount of capacity unavailable due to unplanned breakdowns to 13%, compared with 25-23% Eskom provided for over the period.
It accepted the price at which Eskom calculated its coal cost as efficient, but reduced the provision for its fuel oil cost, arguing that the recently improved fleet performance should result in a reduction in trips and other events that require an increase in fuel oil consumption.
The provision for the use of open-cycle gas turbines was reduced from 6% to 4% based on improved fleet performance.
The subcommittee considered the applications of Eskom’s generation division — the National Transmission Company of SA (NTCSA), which was unbundled and now functions as a subsidiary — and the distribution division separately.
The NTCSA applied for R131bn in the next financial year in capital cost for grid expansion. In 2026/27 it wants R161bn and in the final year of the tariff period it asked for R191bn.
Based on Eskom’s performance in previous years, in which it regularly underspent the capital amounts allocated, the committee considered reducing it to only 34% of the amount requested.
Committee members however agreed that they “may be cutting too deep” and if they proceeded with this drastic action, Nersa will be accused of allowing independent power producers but failing to enable the grid expansion that is crucial to connect them to the grid.
In deciding to reconsider this recommendation, the committee considered that before the unbundling it was much easier for Eskom to use the money meant for grid expansion to assist its generation division, which was in a crisis at the time.
The committee agreed that Nersa had to put measures in place to ensure that it does not recur.
During the meeting it was disclosed that Nersa was in discussions with National Treasury about the amounts included in the revenue allocation for Eskom’s obligations relating to the environmental levy and carbon tax, which brings hope of some relief on those items as well.
Tariff structure
While it is under consideration, the structure of Eskom’s tariffs is also under the spotlight. Eskom has applied for considerable changes in its tariff structure, which includes an increase in fixed charges.
This has upset many consumers who have installed solar panels and are using much less energy from Eskom but remain connected to the grid.
Another important change it wants to make is scrapping the inclining block tariff for residential users and to charge them according to time of use. Electricity will then be cheaper during off-peak periods and expensive during peaks.
Nersa held a public hearing on the matter on Friday.
The environmental groupings Green Connection, the Southern African Faith Communities’ Environment Institute (Safcei) and groundwork strongly rejected Eskom’s retail tariff plan.
The Green Connection called for “a comprehensive stakeholder process where the entire country can engage on electricity and energy issues. This should cover pricing and policy and look at how to finance the entire generation and supply system in a way that ensures that electricity is affordable and accessible for ordinary people. We especially need to ensure that there are proper subsidies for marginalised and vulnerable people.”
It said in a statement that it opposed the proposed increase in the fixed portion of the tariff “because it appears to force people to pay even when they do not use electricity from the grid. This would be like charging customers to simply enter a shop, regardless of whether they buy anything.”
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