Demonstration outside the Eskom offices in Belville against the rising electricity tariffs on 12 August 2021. Picture: Gallo Images/Die Burger/Jaco Marais
The National Energy Regulator of South Africa’s (Nersa) decision to approve Eskom’s retrospective electricity tariff application has sparked criticism from members of Parliament (MPs).
Nersa recently ruled that Eskom could recover R8.1 billion for the 2021/2022 financial year.
While Eskom initially sought R23.9 billion through its Regulatory Clearing Account (RCA) application, the regulator approved significantly less – just under R8.1 billion.
This decision is expected to result in a 4% electricity tariff hike in 2025.
During a debate in the National Assembly on Thursday, Democratic Alliance (DA) MP Kevin Mileham argued that while RCA applications are meant to help Eskom recover unforeseen expenses and maintain financial stability, the utility’s requests for tariff increases amounted to “exorbitant demands”
“There can be no doubt that the RCA adjustments are complex and not easily understood by consumers and businesses who are just expected to cough up,” he said.
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The DA MP said there was little motivation on Eskom’s part to manage its costs and revenue effectively.
“Eskom’s ongoing reliance on RCA adjustments suggests that there are systematic issues within the organisation that are not being addressed,” Mileham said.
“It’s a well-known fact that Eskom carries some R400 billion in debt and it is its customers who are paying the cost of that even though it is its own internal issues that have caused the problem in the first place.”
Mileham also highlighted the fact that Eskom has received at least R242 billion in bailouts from government.
“For the next 10 years, Eskom is set to receive a further R254 billion in debt relief.
“That’s half a trillion rand to prop up an entity that has a near monopoly on South Africa’s electricity supply.
“What that means is that taxpayers are paying twice for Eskom’s poor decisions. Firstly, they pay in the form of bailouts and pay again when they pay their electricity.”
READ MORE: New tariff structure may raise costs for some Eskom users
He emphasised that rising tariffs were placing a heavy burden on low-income households, making electricity increasingly unaffordable.
The DA MP called for a review of Nersa’s tariff determination process.
“For far too long the tensions between Eskom and Nersa have resulted in court cases, disputes and rulings that have ended up costing… every member of the public more.
“It has now reached a point where ordinary South Africans are being forced to choose having electricity or putting food on the table.”
uMkhonto weSizwe (MK) party MP and former Eskom CEO, Brian Molefe, described Nersa’s decision to allow Eskom to recover R8 billion as a “prediction error”.
“In fact, it doesn’t qualify to be called an error. It is a fundamental error in estimation. It points to a fundamental flaw in the revenue estimation model of Nersa.
“More importantly, it points to the fundamental flaw to the operating model of Eskom,” he said.
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Molefe stated that his party believes the focus should be on regulating the price of coal, rather than the price of electricity.
Economic Freedom Fighters (EFF) MP Nazier Paulsen expressed concern that, with Nersa’s approval, South Africans would now bear the financial burden of Eskom’s past failures and inefficiencies.
He warned that the EFF would “take to the streets” if the “massive increases” in the cost of electricity persist.
Electricity and Energy Minister Kgosientsho Ramokgopa acknowledged that rising electricity prices were a critical concern.
Ramokgopa told Parliament that the key challenge in tackling the energy crisis lies in balancing Eskom’s financial sustainability with the country’s economic wellbeing, a challenge underscored by Nersa’s recent approval.
“Eskom’s financial sustainability is crucial for the energy sector and national economy. Over the years, Eskom has been weighed down by debt and inadequate maintenance.
“Last year, the government announced the R254 billion debt relief to relieve some of this burden ensuring that Eskom can continue delivering electricity. The point I’m making here is that it costs money for us to keep the lights on.
“Essentially we are faced with the following scenario: that if you don’t provide financial support that is required, we are likely going to plunge the country back into darkness and undermine the prospects of growth,” he said.
The minister explained that the debt relief provided to Eskom comes with conditions, one of which is ensuring that “electricity prices reflect the reasonable and efficient cost of generation and supply”.
He further clarified that Nersa is not required to allow Eskom to recover the R8 billion within a specific timeframe.
According to Ramokgopa, the recovery can be spread across multiple financial years.
“That’s the one concrete proposal that we will be making going forward,” the minister added.
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