Government is considering measures to offset a proposed power-price hike, including delaying plans to raise carbon taxes, electricity minister Kgosientsho Ramokgopa said.
The authorities will make a submission on the need for costs to be increased by less than the 36% sought by Eskom, Ramokgopa said at a conference in Cape Town on Thursday. The minister signalled earlier this week that the government plans to intervene to keep prices down.
If Eskom’s application was granted, hiking power prices by more than a third would exacerbate energy inequality and render businesses uncompetitive, he said. “It’s in our collective interest to resolve that issue.”
Eskom’s tariff application for its next financial year is the latest impediment to economic growth presented by South Africa’s struggles with power supply. While rolling blackouts that hit the economy intermittently since 2008 were brought to a halt about six months ago, electricity costs have risen 600% since 2006.
The power utility has said its application is based on the costs it will incur to provide electricity. It’s also applied for an 11.8% increase in its 2027 financial year and 9.1% hike the following year.
While the government will be careful not to interfere in the process by which the National Energy Regulator of South Africa determines the tariff increase, it will make a case for lower increase, Ramokgopa said.
“I’m going to be a participant” in the Nersa process “and then they’ll know” where the policymaker stands, Ramokgopa told reporters at a briefing after his speech.
Carbon taxes
While carbon taxes for South Africa’s top emitters like Eskom have increased, the current rate is still a fraction of what the World Bank’s High-Level Commission on Carbon Prices estimates it should be. National treasury proposed in February that carbon taxes be increased.
“We know what the immediate implications are, it can create an impression that we’re going back on our nationally determined contributions,” the minister said, referring to a long-term emissions reduction plan South Africa has submitted to the United Nations. “You’re not cancelling, you’re delaying. Of course, introduce it and then people are into poverty so of course those are the difficult choices that we have to make.”
South Africa has already delayed the closure of three coal-fired power plants, imperilling its NDC target. Eskom accounts for about two-fifths of the country’s greenhouse-gas emissions.
Ramokgopa said the ministry also plans to make a submission on the return-on-assets Eskom aims for, which could affect the amount of profit it makes relative to the assets it holds, “without necessarily undermining their ability to meet their obligation”.
After Nersa decides on Eskom’s application, the electricity ministry will seek “additional relief we can give to the poor”, including revising upwards the amount of free basic electricity they receive, Ramokgopa said. The amount by which the 50kWh/month allowance can be increased is being researched by the department, he said.
Read: Eskom price hike request heralds more consumer pain
That’s well under the amount of power used by the poorest households, estimated at 200kWh/month by Johannesburg’s EE Business Intelligence, and Ramokgopa has said that only a fraction of those entitled to free electricity actually get it. — (c) 2024 Bloomberg LP