ENERGY COSTS
No joke: Eskom wants you to pay 32% more for your electricity from 1 April 2023
Eskom has asked the National Energy Regulator of South Africa to approve a whopping 32.02% electricity price increase for the 2024 financial year, to take effect from 1 April next year.
Following a court order in July this year, the National Energy Regulator of South Africa (Nersa) is consulting with Eskom on its multiyear price determination for the 2024 and 2025 financial years. Just two weeks ago, Nersa asked for public comment on the power producer’s proposed increases of 38.1% for 2024 and 5.12% for the following year.
A week after the period for public comments closed, it seems that the electricity supplier went back to the board and simply shifted some numbers around, dropping the 2024 increase to 32.02% and lifting the 2025 increase to 9.74%. Eskom hastens to add that independent power producers account for 5.39% of the 2025 increase. If this is a case of creative accounting, there is still a 1.46% shortfall from the original proposed increases.
The proposed 32.02% price increase, if approved, will be implemented on 1 April next year and the key contributors include:
- Depreciation of 10.67% – due mainly to an incorrect regulatory asset base valuation by Nersa in the 2023 financial year.
- Eskom primary energy increase of 7.85%.
- Emergency procurement from independent power producers is driving a cost increase of 9.05%.
Hasha Tlhotlhalemaje, general manager of regulation at Eskom, says the state-owned enterprise is required to provide any updates on changes in conditions and environments that impact various cost elements of the revenue requirements.
Although the total revenue applied for last year remains unchanged at R335-billion for 2024 and R365-billion for 2025, there have been other changes that are likely to affect costs going forward. These include:
- Increases in Eskom’s primary energy costs – this is a combination of costs related to the diesel price increase and a higher volume of diesel to be used.
- Removal of arrear debt-related costs – following a decision by Nersa for the 2023 financial year, Eskom will no longer follow the practice where customers cross-subsidise each other, with regular payers contributing to the gap created by non-paying customers.
At the end of July this year, municipalities across the country owed Eskom a combined debt of close to R50-billion. Eskom’s revenue application states: “It needs to be understood that all electricity consumers have been subsidised by the taxpayer for many years.”
- Removal of carbon tax-related costs – this has been removed after the Minister of Finance announced impending legislative changes to postpone carbon tax liability beyond the 2025 financial year.
- Increases in independent power producer (IPP) costs – mainly due to increased emergency IPP procurement.
- A slight increase in sales volumes.
- Further reduction of 59% in average energy availability factor for Eskom power stations.
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Proposal to claw back R69-billion
Tlhotlhalemaje adds that Eskom has also put forward proposals to claw back part of the incorrectly deducted equity support from 2020 to 2022. This dates back to a 2020 decision by Nersa to deduct R69-billion that had been provided by the government over three years as an equity injection that Nersa decided to treat as revenue. R10-billion has already been recovered by Eskom.
The Supreme Court of Appeal handed down a ruling in July this year that the remaining R59-billion of the incorrectly deducted equity be added to the allowable revenue decisions for each year, starting on 1 April, with R15-billion in each year from 2024 to 2026, with a final amount of R14-billion in 2027.
“The proposal is to allow these recovered amounts to be targeted towards the return on assets for the transmission and distribution network businesses. It also allows for the further migration towards cost reflectivity for the Eskom network businesses. Focus can then be shifted to the generation business in subsequent years,” says Tlhotlhalemaje.
“Eskom has submitted proposals to Nersa to restructure tariffs during August 2022. The translation from the allowable revenue to tariffs that will better reflect the unbundled costs and fixed vs variable costs is included. This ensures that customers are more aligned to the actual costs they impose on the system.
“This also addresses the key aspect of certain customers using the electricity system as a battery and back-up,” he says. BM/DM
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50 000 odd employees versus under 10 000, cost per employee of 800K plus, versus about 400K, and now where do we stand? Add plant availability of 85% versus like 50% at best, and now we are starting to strip out some of the waste and inefficiency. Pretty soon we will have the world’s lowest cost electricity again
A 30% plus increase and you can kiss business in this country goodbye
And the more efficient the average paying household becomes with energy use, the less revenue Eskom receives, so the only way to increase revenue is further rate increases. A vicious circle.
50k employees vs 10k – ?when
32% increase on Zero is = R0,00
Those not paying must pay.
Good morning Daily Maverick
Perhaps we need to seriously look at all the options for business and residential customers to reduce their bills. Everything from changing lights to geyser timers to solar energy to heat pumps
It’s great getting the above news but it’s scare mongering and cluck bait if you never give us any hope or offer a plan or two
Eskom can push that increase somewhere I can’t mention.I will
not support madness.
The problem is if you resist, Eskom will also push you into that same place of darkness.
Agree
The only madness is in persisting with the belief that NESRA can decide on how to fix ESKOM’s woes; when NESRA and ESKOM disagree, take it to the High Court. (1) A country DOES need a national grid because very few of us use power on such a steady basis that it pays us to generate our own power – a grid helps balance demand with supply (2) such a grid is a Common Pool Resource and we should use the work of the late Elinor Ostrom to guide us on how these should be governed – she would (a) have NO need for NESRA (b) recommend a board made up of elected stakeholders from the different constituencies of users (Agriculture, Mining, Industry, Commerce, Civil Society etc.) (c) that, because it IS a CPR, all board minutes and all financials should be in the public domain, freely available on the Internet. By following the principles developed by Ms. Ostrom on the governance of CPRs we would soon get an ESKOM that was fit for purpose and which supplied Electricity at the most cost effective tariff possible. Bruce Danckwerts CHOMA, Zambia
Hi Bruce, sounds like a good idea. How do we get this info to Gwede Mantashe/Andre de Ruyter?
it’s either pay or Eskom collapsing. they cannot raise more debt. the chickens have come home to roost. you know who we can thank for this mess.
What electricity????
An interesting article would be to take few use cases (typical middle class home, typical admin/commercial type business and a profile factory) and compare what end users are paying at 32% increase to those same use cases in California, England, India and China. I predict total cost (admin, availability and kWh) we are now the most expensive. FUBAR!
I just can’t but wonder why Eskom expects consumers to continue paying for their inefficiency. Why are employee numbers not coming down, why are input costs such as coal not reducing over time, why are we having to pay for poor recruitment decisions and incompetent technical personnel? The tax payer is expected to continue paying for their incompetence. Utter madness. If this increase is approved, it will kill off what little manufacturing remains in SA and more and more people will be unemployed.
You are so right Peter. Eskom increases the price of electricity, but only for paying users. Those who get free electricity or steal it, don’t care two hoots how ridiculous and unaffordable the increase may be. Eskom should rather take their chances with Mbeki and his anc, they who refused to upgrade and maintain the fully operational SOE they got free gratis and for nothing in 1994. After that the current management should be allowed to run the place without anc interference. First thing they will do is to get rid of masses of useless employees who are employed purely for improving the unemployment rate.
Lots of frustration with regard to tariffs. What should they reasonably be? In the 1990s, Eskom tariffs were very low (lots of generation capacity and good cost control). That has spun out of control. At present, Eskom charges around R1.43/kWh for low usage consumers, but in Johannesburg (via City Power) this costs closer to R2.90/KWh. At least double!! In Botswana the cost per kWh for consumers is around R1.40/KWh. IN Rwanda this is R5/KWh for usage> 50KWh/month. Eskom’s proposed increase will have a severe impact on consumers in municipalities, taking us to R3.80/kWh. We are not the cheapest and not the most expensive. We should reasonably expect that the scale of operations in SA should take us to the bottom of the tariff scale but we are not! Why not? Inefficiencies in Eskom is certainly a major factor. However, if you consider the large amount of municipalities that are indebted to Eskom this shows the difficulty taht Eskom has from outside. Municipalities are accumulating debt because of their own collection inefficiencies and their propensity to cross-subsidise. In the end, the structure of our supply system contributes to the problem, but we have a vast swathe of the population that do not pay for the services they use, which means that those that do pay have to accept a charge of 32% higher from April 2023. We don’t like it, but living in SA comes at a price. We have a culture of non-payment and non-collection and no political will to change either!
I would add that Muni”s are so woefully managed with massive staff costs aka cadre deployment, that price gouging for taxpayers is inevitable. Ask any Jozi resident or business
We should show them the collective middle finger and tell them where to get off.
GEE EFF WHY eskom, vtsek !!!!
I am a rural residential user and pay Eskom directly. I now pay in various “charges” before I use a single unit of electricity, of 3000/month. These “charges” are not subject to any oversight and Eskom puts them up as it sees fit. So as well as increased tariffs the base cost is huge. I am one person. It beggars belief. There are no pensioner allowances either. I will be going off grid this coming year step by step. Its become unaffordable. I do not know how industry will cope and remain competitive going forward.
I have noticed the pattern with Eskom – they always double up the increase they want – then Nersa hearings are held the public protest and 32% gets dropped to 16% (what they wanted all along and still a ridiculously high and unaffordable increase) We as SA citizens all feel relieved that we won and achieved something. They are pulling the wool over our eyes
Eskom, are you out of your mind? Where do you think that money is going to come from? If you want to force us to go back to candles and wood fires, at least say to openly. That increase is simply not affordable.
Cut your cloth accordingly Eskom. most of those at Eskom do sweet nothing so get rid of them. keep people that actually work and pay for people who can fix the mess that Thabo Mbeki started by bring professionals back. until then no increase at all in fact start paying back the money for al the blackouts at most inconvenient time.