Energy regulator Nersa has approved a 33.77% increase in Eskom’s electricity tariffs over the next two years, starting with a whopping increase of 18.65% this April.
Although significantly less than Eskom had asked for, the increases, which are well ahead of the consumer inflation rate, are likely to hit consumers and businesses hard.
The increases, which will be imposed over the next 15 months, are as follows:
- Total revenue of R300-billion for the 2023/2024 financial year, which begins on 1 April 2023, translating to a tariff of 173.8c/kWh. The percentage increase is 18.65% based on Nersa’s approved tariff of 146.48c/kWh in the 2022/23 financial year.
- For the 2024/2025 financial year, which begins on 1 April 2024, the tariff rises to 195.95c/kWh. This is a further 12.74% increase
Taken together, the increase over the two-year period comes to 33.77%.
The price increases were determined under Eskom’s fifth so-called multi-year price determination.
Despite the big jump in tariffs, they fall far short of what the state-owned utility had asked for. It has wanted to jack up prices this year by 32% to pay for more purchases from independent producers as it struggles to meet demand.
Debt burden
The cash-strapped company has said funding shortages hurt its ability to maintain plants and buy diesel to fuel auxiliary turbines when its coal-fired units fail.
South Africa has over the past two decades gone from having surplus power to regular blackouts. Financial constraints at Eskom, which has R396-billion of debt, combined with operational challenges, caused the utility to impose more than 200 days of blackouts in 2022 to save the national grid from collapse.
“Eskom has both a debt problem and operational problem which makes the prospects of recovery very slim,” Rashaad Tayob, head of fixed income at Foord Asset Management South Africa, said before the announcement. The nation’s tariff methodology is similarly flawed and gives “Eskom no incentive to control costs”, he said. — (c) 2023 NewsCentral Media, with additional reporting (c) 2023 Bloomberg LP