The National Energy Regulator of South Africa (Nersa) approved an average electricity tariff increase of 9.61% for the 2022/23 financial year, which could hurt the country’s business owners.
While this is considerably less than the 20.5% increase that Eskom had applied for, the 9.61% hike is still expected to hamper South African businesses, especially as they have just started recovering from the Covid-19 lockdowns.
Energy expert, Clyde Mallinson, spoke to Newzroom Afrika regarding Nersa’s approved increase.
Mallinson, who presented at the Nersa hearings where Eskom was making the application, said he had recommended that the regulator make a decision that focuses on South Africa’s poorer residents.
“I called on Nersa to make what I referred to as a pro-poor decision, and I said that there shouldn’t be an increase exceeding inflation,” he said.
According to Statistics South Africa, the country’s average inflation rate during 2021 was 4.48%.
“In fact, if possible [I said] it should be lower than inflation,” Mallinson added.
Mallinson further explained that he recommended that the county’s power problems should be shifted back into the policy arena.
“I said [at the Nersa hearings] that we need to move this decision, and the problems over Eskom, back into the policy arena,” he said.
“We can’t every year have Eskom needing more, Nersa giving less, and then government having to bail them out further.”
“My suggestion was that they get given less than they actually need. They, therefore, put pressure on government because government now will have to inject further finance into Eskom,” Mallinson added.
He explained that because these bailouts will hurt the government, it will start looking more seriously at policy on fixing the issues at hand.
Newzroom Afrika also spoke to a small business owner in Langa, Cape Town, over the impacts he expects the increase to have.
“It saddens us that the government can put such a hike on our business because our business is solely dependent on electricity,” he said.
“Now we see ourselves having to put more money towards overheads, rather than empowering and employing our youth.”
The approved increase was announced during a Nersa briefing on Thursday, 24 February 2022.
During the briefing, Nersa chairperson Nhlanhla Gumede said that the regulator had approved Eskom’s allowable revenue for the year at R249.726 billion — R26.531 billion less than the R276.257 billion for which Eskom had applied.
Gumede said Nersa decided on this increase by weighing the interests of the economy, consumers, and the power utility.
The price increase will take the average electricity tariff in South Africa from around R1.33 per kWh to approximately R1.46.
If Eskom’s application for a 20.5% increase had been approved, the average electricity tariff in South Africa would have reached about R1.61 per kWh.
Eskom responded to the announcement, saying that it appreciated that Nersa made the revenue determination in time for it to implement the increases.
However, Eskom’s chief financial officer Calib Cassim explained that the power utility would have to determine the impact of Nersa’s decision on its long-term sustainability.
“The Eskom Board will deliberate further before deciding on how to continue to sustainably provide electricity to the extent possible in the context of this revenue decision.”
The power utility also said it wants to understand the reasons for the decision.
