- Eskom and Nersa have been battling in court over the loss of a R69 billion lifeline payment made to Eskom by the government. Eskom won.
- The result is that the electricity prices – charged by the utility – will go up by around 15% as the payment is added back to Eskom.
- That won't necessarily mean your home electricity costs will go up by 15%, as municipalities could absorb the costs.
- But you'll pay for it in other ways, and eventually.
- Go to www.BusinessInsider.co.za for more stories.
Bulk electricity prices are set to increase by around 15% next year after a court victory for Eskom.
But that won't necessarily reflect on home bills directly.
Eskom and the National Energy Regulator of South Africa (Nersa) were battling it out in court over Nersa’s decision to deduct a R69 billion equity lifeline from Eskom’s allowable revenue.
That R69 billion had been allocated to Eskom in the 2019 budget to help the power utility pay off its spiralling debt.
The high court in Johannesburg ruled Nersa’s decision illegal, and said the full amount has to be paid back to Eskom over the next three years.
The immediate result is that, in April next year, the average standard Eskom tariff approved by Nersa will go up from 116.72 c/kWH to 128.24 c/kWh – an increase of 9.8% - as the first R23 billion is added back.
That’s in addition to a 5.22% tariff increase that Eskom had already negotiated for next year, which brings the total increase to around 15%.
As that’s just the first payment. There are two more to go, which means significant tariff hikes for the next three years.
Does that mean consumers will pay 15% extra on electricity next year? That's complicated complicated.
First, the 15% increase is still up for discussion, says Tygue Theron, commercial head at Energy Partners Intelligence, and it can still be adjusted pending consultations between Eskom, Nersa, and the government.
Nersa can also appeal the ruling, and may succeed in having the judgement set aside in time. In a statement, the regulator said it had a "serious concern" that the court had gone beyond its remit by making a decision on tariffs.
"The judgment, if left uncontested, will not only disrupt the industry, but will further suppress economic recovery, considering the current threat that the country’s economy is facing. This case was not merely a case between Eskom and Nersa, but rather a case of Eskom versus the South African economy and electricity consumers," said Nersa.
However, Theron says he’s “confident that there will be an increase of no less than 10% next year 2021/22 for Eskom’s direct customers, regardless of what happens next.”
Secondly, that potential 15% increase is the bulk price of electricity that Eskom’s direct customers, including municipalities, pay. That also includes the likes of smelters, some agricultural operations and other big power usage, so those higher electricity prices will affect the cost of manufacturing goods, and ultimately consumers – indirectly.
However, there most likely won’t be a flat 15% increase on the monthly price you pay for electricity at home, for the majority of South Africans who buy their power from a municipality that acts as a reseller. It’s up to the municipalities how they absorb the extra cost of electricity they buy from Eskom, and they are answerable to their residents.
For instance, according to Phindile Maxiti, a Cape Town City councillor, Cape Town's electricity tariff has consistently been far lower than that of Eskom’s over the last 10 years.
On the other hand, increasing prices beyond Eskom's increases offer a tantalising way for municipalities to increase revenue in an easily-to-collect fashion.
What will municipalities do? According to alderman Ian Neilson, the City of Cape Town's mayoral committee member for finance and executive deputy mayor, "it is too soon to be able to predict the impact on the City’s electricity tariffs, as we are yet to be informed on the bulk tariff increase for municipalities."
However, large tariff increases may just become the norm, says Theron, who expects increases of 15% to 20% in the near future. Eskom’s debt is growing much quicker than its revenue, he says, and getting back on a stable footing is likely to mean such increases.
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