State-owned energy utility Eskom says it appreciates the tough tariff decision made by the National Energy Regulator of South Africa (Nersa) for the 2023/24 and 2024/25 financial years, for which the utility has been granted tariff increases of 18.65% and 12.74%, respectively.

The utility says it is confident the decision will positively contribute from a financial and sustainability point of view, while the revenue determination of R319-billion and R352-billion for the financial years, respectively, will allow a further migration towards a price level that reflects the efficient cost of producing electricity.

Eskom has also apologised for the extent of loadshedding, saying it understands the severe impact it has on businesses and individuals.

However, representatives from the business, labour and government spheres have expressed outrage over the persistent tariff increases that seem to lead nowhere.

For South Africans, there is no escape from spiralling electricity prices and increased loadshedding, as customers are expected to shore up the country’s failed electricity utility, comments the Organisation Undoing Tax Abuse (Outa).

Although the 2023/24 financial year’s grant came in below the 32% hike that Eskom requested, it is still well above the inflation-linked levels that most stakeholders believe should have been implemented.

Outa says Eskom is experiencing huge pressure to improve its energy availability factor to above 65% to meet the regulator’s conditions, while not being given the full extent of its 32% tariff increase application.

The tariff increase is applicable for Eskom’s direct customers, including municipalities, from April 1, while the increase from the municipalities’ side will kick in from July.

Outa, which formally requested Nersa to grant Eskom only a maximum consumer price index tariff increase, says it is outraged at government’s failure to help South Africans weather this storm.

The organisation believes government, particularly Mineral Resources and Energy Minister Gwede Mantashe can do better to fast-track independent power producer (IPP) procurement, instead of leaving Eskom with no choice but to use expensive diesel-powered open-cycle gas turbine generators to reduce loadshedding.

While it is unclear what Nersa will do if Eskom does not meet its energy availability requirement, Outa Parliamentary adviser Liz McDaid says it is encouraging that Nersa is pushing Eskom on this.

Outa commends Eskom for acknowledging that corruption adds to the breakdowns at coal-fired power stations, but believes more urgent and decisive efforts to address corruption are needed.

Meanwhile, the Midvaal local municipality comments that the price of electricity has risen by more than 500% in the past 16 years, with Eskom continuing to receive billions of rands in bailouts, and, yet, South Africans currently face not having electricity for up to nine hours a day.

On top of this, the municipality explains that increased loadshedding stages have an adverse effect on the municipality’s electricity infrastructure and network, including equipment failures and increased instances of cable theft.

The municipality is in the process of getting an embedded generation policy in place, which will result in the municipality introducing a feed-in tariff for solar users to supply energy into the grid. It encourages more municipalities to consider this route.

Representing the broader voice of local government, South African Local Government Association says consumer debt to municipalities stands at R289-billion as it stands, without the impending tariff increase. The association deems the current electricity model - of municipalities putting a mark-up on Eskom's direct supply of electricity and then selling to households - as fundamentally flawed.

The association is advocating for legislative reforms that will enable municipalities to generate their own electricity and purchase electricity from IPPs.

Moreover, SALGA would like to see more transparent coal contracts from Eskom, and for the entity to re-evaluate the skills and number of employees it really needs.

The South African Photovoltaic Industry Association echoes the sentiment, urging those that can afford solar systems to seriously explore alternatives for more stable and secure electricity supply. It also continues to urge for the incentivisation of domestic systems to contribute to demand side management efforts in the country.

The Consumer Goods Council of South Africa (CGCSA) warns that the tariff increases awarded to Eskom for the 2023/24 and 2024/25 financial years will add more operational costs to companies in the consumer goods sector, which are already battling with the financial impact of loadshedding.

The council is adamant that the tariff increases should be accompanied by a demonstrated commitment to deal effectively with the problems facing the power utility.

“The constant breakdowns point to a deeper problem than we have been made to understand. It is important that Eskom be more transparent about the extent of its problems and devise a clear and measurable roadmap to improve the reliability of power supply in the country,” the CGCSA states.

Cape Town Mayor Geordin Hill-Lewis agrees, stating that Eskom can reduce its bloated payroll, cut suppliers which are over-charging for services or sub-standard coal, root out corruption and recover State capture loots, before it asks for tariff increases. 

Debt Rescue CEO Neil Roets points out another unintended consequence of loadshedding has been consumers becoming increasingly dependent on credit to make ends meet, owing to high costs of living. This while farmers have also spent millions on acquiring generators, which contribute to carbon emissions, and cause even higher input cost bills.

He suggests government as the ultimate energy policymaker stop repeating the narrative and start considering what is best for energy and food security.

Meanwhile, political party Action SA president Herman Mashaba agrees with Outa, saying the country’s leaders have no plan to end the energy crisis and that there will be no end to rolling blackouts as long as the African National Congress remains in power.

He believes Eskom needs to be depoliticised and that more IPPs need to be allowed and enabled onto the grid.

National Employers Association of South Africa CEO Gerhard Papenfus has a similar stance, stating that while South Africa is not a failed State yet, its trajectory is heading in that direction.

“Government’s failure to sustain the essential elements of a functioning State, including sound leadership and maintaining of infrastructure, is most visible in the collapse of Eskom,” he remarks.

Papenfus questions how things are going to improve, even with this increase, since detrimental policies, corruption and inefficiency placed the country in its current predicament, and those issues remain.  

“Increases will not drag Eskom out of the pit it finds itself in; only strong, uncompromising leadership, ethical governance, which include the rooting out of corruption and those involved in it, from the highest to the lowest level, and employment policies based on merit, will achieve it,” Papenfus laments.

Political party the Democratic Alliance federal leader John Steenhuisen earlier this week wrote to President Cyril Ramaphosa, asking why his government refuses to implement the obvious solutions to the electricity crisis that have been proposed for years.

Environmental organisation Greenpeace Africa climate and energy campaigner Nhlanhla Sibisi says the latest tariff increases, at almost three times the inflation rate, will seriously and negatively impact South Africa.

The organisation deems the best and most immediate solution to be a just transition to renewable energy, which will not only help solve the unemployment crisis, but also ensure that no South African continues to pay for Eskom’s history of corruption and mismanagement.

WRONG FOCUS

Trade union Solidarity says Nersa should pay more attention to applications from private power generators and less attention to Eskom’s applications for more expensive power.

Solidarity Research Institute economics researcher Theuns du Buisson says the time that Nersa spends every year to consider tariff increases can be better spent on policy review to allow new entrants to the power grid.

“The false choice of either Eskom getting the tariff increase or of it being dependent on even more bailouts is being presented to South Africa on an ongoing basis, but the fact remains that we see both of these harmful concessions being made every year,” he explains.

Steenhuisen also deems it necessary that the President declare a ring-fenced State of Disaster to exempt Eskom from all obstacles to efficient spending and rapid decision-making, including localisation and empowerment legislation.

“We cannot afford it that Eskom allows confined interests to take precedence over the entire South African economy nor that Nersa remains a constant obstacle to those who do want to offer solutions to the crisis,” Du Buisson concludes.