Tariff increase: Eskom request to put SA electricity among the priciest in the world

South Africa is currently ranked 57th out of 140 countries. More importantly, if the tariff increase goes ahead – on the back of a number of years of higher-than-inflation power hikes – SA will be the 11th most expensive, in terms of electricity costs per household, in the developing world.

The National Energy Regulator of South Africa (Nersa) approved an Eskom electricity increase of 15.63% for this year. The increase was implemented on 1 April for consumers supplied directly by Eskom. For the remainder of consumers, these new rates took effect on 1 July.

Tariff increase to place SA among most expensive

Local municipalities can also apply to Nersa for further tariff increases in addition to the already approved national
increase.

Economist Mike Schüssler said: “South Africa is currently in the middle – the 57th most expensive out of about 140 countries for households.

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“If Eskom is granted the 20% increase, we will probably go further up, close to the top 30 most expensive electricity providers for households.

“For emerging markets, we will become the 11th most expensive – quite steep for a country producing its own coal.

“Countries who don’t have their own coal – like Denmark, Germany, Bermuda, Jamaica, Belgium, Portugal, Ireland and the United Kingdom – are the expensive ones.

“For a country with coal, we will become like one of the expensive ones,” Schüssler said.

“For households, it seems that our neighbours are a lot cheaper.”

Before this year’s SA power increase in April, in March Lesotho had “cheaper power”.

“They were R1.55 per kilowatt-hour on average, Swaziland was R1.75 per kilowatt-hour, Botswana R1.61 and Namibia R1.95, with South Africa R2.17 per kilowatt-hour.”

Eskom’s court battle

Eskom is currently mired in a court battle with Nersa after it submitted a court application to review and set aside a decision by Nersa to reject its tariff application for 1 April next year to 31 March 2025.

Nersa has presented four new options to Eskom for determining the tariffs it will be allowed to charge from 1 April next year.

But the utility is persisting with its court application to compel Nersa to process its application according to the existing pricing methodology.

Nersa earlier rejected Eskom’s application, which Moneyweb has learnt is for a 20% increase because the existing pricing methodology has lapsed.

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New methodology for determining tariffs

Eskom said the current methodology has not lapsed and Nersa’s internal legal advisor also said it does not lapse unless Nersa replaces it with a new methodology – which it has not done.

Instead, Nersa has embarked on a confusing process of public participation about proposed new principles underpinning the new methodology, or the principles used in the application of the existing methodology, depending on which of Nersa’s contradicting pronouncements one relies on.

Against this background, it is not clear how Eskom’s new tariffs will be determined. Current tariffs lapse at the end of March next year.

The new tariffs have to be tabled in parliament by March 15 every year.