A few hours before the court-ordered deadline, energy regulator Nersa on Thursday made the “very difficult” decision to grant Eskom a tariff increase of 18.65% for 2023/24 and 12.74% the following year.
This, however, comes with non-negotiable conditions that will become part of Eskom’s licence conditions. Whether the regulator will be able to enforce the conditions remains to be seen.
Those who buy electricity directly from Eskom will pay more from 1 April next year and those who get their electricity from municipal distributors from 1 July.
It is a further setback for consumers who are battling with tight budgets, high fuel prices, increases in interest rates and inflation. Businesses are suffering loss of production and huge additional expenses due to load shedding, and indications are that many small businesses may be forced to close.
Jannie Strydom, CEO of Agri Western Cape, said in a statement although the increase is lower than the 32% requested by Eskom, 18.65% is intolerable.
“This is a drastic increase in tariffs for electricity supply that is already extremely unreliable. Consumers therefore pay more for less power.”
“The energy needs of farming operations remain the same irrespective of the electricity tariff. Producers are now forced to invest in alternative sources of electricity, which requires enormous capital,” says Strydom.
“Food security cannot rest solely on the shoulders of producers. Food production is currently under immense pressure. Decision-makers need to recognise the seriousness of the problem – urgent intervention is needed.”
Cape Town Mayor Geordin Hill-Lewis said: “South Africans are being asked to pay for corruption and mismanagement at Eskom in the most unfair, unaffordable and unjust way.”
He added: “Eskom has alternative ways to raise funds: by reducing their bloated payroll, by cutting suppliers who are over-charging especially for sub-standard coal, and by ending corruption, including recovering state capture loot.”
It had to balance the obligation to ensure Eskom’s sustainability with the impact on the economy and the affordability of electricity.
The regulator received more than 2 000 written submissions about Eskom’s tariff application.
One of the regulator members, Thembeka Semane, opposed the decision and had her dissenting vote note “for anything above inflation”.
After a number of adverse court rulings when Eskom took several of the regulator’s tariff determinations on review, it tried to adhere strictly to the prescribed methodology and the officials initially seemed inclined to largely give Eskom what it was asking for.
One of the most debated issues was the allowance for diesel to fuel the utility’s open-cycle gas turbines (OCGTs). Eskom asked for a load factor of 12%, which is much more than the 1% Nersa allowed when the plant was still used as intended, during periods of peak demand and emergencies. (Load factor is the ratio between the actual time the plant is in use compared to the maximum time it is available for use.)
The officials advised in December that Eskom’s request be granted, and after regulator members had them rework the numbers, reduced it to 10% – which was the recommendation before the regulator on Thursday.
During the meeting the regulator members however decided to reduce it further to 6%, which will give Eskom R8.4 billion at a price of R6.34c/litre. He said Eskom must increase the availability of its power stations to reduce its reliance on diesel. He said Eskom has about 39 000 MW of installed coal capacity but only 16 000 to 18 000MW is generally available to generate electricity. “They are using OCGTs instead of coal.” moneyweb