On Thursday, the National Energy Regulator of SA (Nersa) granted Eskom a 9.41% increase for the 2019/20 financial year. It kicks in on April 1.
On the same day, a second increase kicks in for Eskom. This was a 4.4% rise Nersa approved for the power utility in October to allow Eskom to recover certain costs that were beyond its control going back to 2014.
Eskom clients will therefore pay 13.81% more for electricity on April 1. But it doesn’t end there. In July, prices will rise further when municipalities such as eThekwini, which act as electricity middlemen, push up their prices.
Ethekwini’s chief financial officer, Krish Kumar, said the city sympathised with consumers and would do all it could to minimise increases.
Last year the city raised electricity by 6.84%, but this year it could be more.
“We are still working with the numbers and we are determined to keep increases below 9.5%. We will do everything in our power to give consumers relief when we finalise the budget,” he said.
Kumar said the city’s electricity bill looked good and balanced as more consumers were moving to prepaid meters.
“Our revenue collection has improved since we rolled out more prepaid meters. In these hard times, we encourage our consumers, particularly those with a fixed budget, to consider prepaid.”
The electricity increases come as fuel prices went up sharply this week. Petrol rose by 74c a litre. Toll fees also went up and from June a carbon tax of 9c a litre of petrol and 10c a litre for diesel will be added.
It is affecting residents and businesses. Musa Makhunga, the president of the Durban Chamber of Commerce, said they were “deeply concerned” about the electricity increases because they had far-reaching consequences for the economy.
He added that the increases ran against the government’s agenda to grow the economy and create jobs.
“It will negatively impact the Durban chamber’s members and the business community at large, in particular those in energy-dependent sectors such as manufacturing, construction and tourism as well as small businesses and entrepreneurs.
“Businesses will need to further adjust to the rising cost of doing business and this may mean job losses and increasing the price of goods and services, which may make us uncompetitive.
“The small-business sector, which has the potential to influence the economy positively through job creation and contribute to innovation and sustainable living, will be affected significantly by tariff increases.
“This will increase their cost of doing business as well as inhibit their ability to grow their business and effectively expand in their current market and penetrate new markets,” he said.
Makhunga said the chamber believed the government should develop and implement a robust turnaround strategy for Eskom rather than rely on tariff increases to keep the utility going.
“The tariff has gone up higher than inflation rates for over 10 years but it has not solved the core issues faced by Eskom and has only burdened the fiscus.”
Christie Viljoen, an economist at PwC, said while the increase was lower than the 15% requested by Eskom, it was still substantial and did not improve matters at the corruption-plagued utility.
“It places more financial strain on Eskom, which entrenches its solvency issues and dependence on government funding to stay afloat,” he said.
Viljoen warned that interest rates could rise as a result of the higher electricity tariffs. Furthermore, unemployment would remain high because job creation was dependent on favourable business conditions.
Sandra Dickson from the lobby group StopCoct called the tariff increase steep, saying Nersa had been put under pressure because of the threat of load shedding.
“The 9.41% on top of the already given 4.4% in October 2018 is unacceptable. The public is now made to pay for Eskom’s blatant mismanagement over the past couple of years,” she said.
Dickson made a submission at Nersa’s public hearings in Cape Town last year where she asked the regulator to examine how municipalities determine their tariffs.
In 2018, consumers who got their electricity supply from the City of Cape Town were slapped with a R150 levy added to their municipal accounts.
“The City of Cape Town added more than 3% on top of the Eskom tariff increases. The city also introduced a new home user category as well as an electricity levy of R150.
“No amount of objection could get the city to scrap or even just lower this levy,” said Dickson.
The Organisation Undoing Tax Abuse (Outa) welcomed a possible investigation by Nersa into governance failures at Eskom.
“Outa looks forward to the quantifying of the cost of corruption. If this is done properly, it should also bring prices down. We expect this to be done with the urgency it deserves,” said Ronald Chauke, portfolio manager on energy.
The Automobile Association said consumers would feel the pain of increased fuel prices as high travel costs “will make everything more expensive”.
“It also makes it harder for job seekers to find work as few of them have the resources to pay current transport costs, let alone increased fees. This, in particular, is worrying, given the country’s high unemployment rate,” said the AA.