Electricity Prices in South Africa Set to Rise Higher than Expected

  • The Organisation Undoing Tax Abuse (OUTA) has issued a response to South Africa’s energy regulator approving an increase in electricity prices in order for Eskom to recover revenue losses.
  • In a statement issued by OUTA, the non-profit organisation believes that “Eskom has not done its homework in projecting its revenue, and therefore should not be allowed to claw back these shortfalls from customers when failing to achieve its unrealistic forecasts”.

The organisation reacted after the National Energy Regulator of South Africa (NERSA) approved Eskom’s application to recover another R13,3 billion from electricity users over the next two years.

The amount translates to an additional 3% per annum increase on electricity prices on top of the 9% per year already approved last year. Eskom applied to claw back R27,3 billion from electricity customers through power tariffs to cover costs incurred for the financial year 2018/19.

Reasonable explanation needed

The energy portfolio manager for OUTA, Liz McDaid, said: “We find it unacceptable that NERSA approved a 6,5% increase to Eskom to be implemented over the next two years without providing reasonable explanation to the public.”

She added: “Society needs rational reasons to prevent them from questioning NERSA’s decisions.  This could open the regulator up for possible unnecessary legal challenges, which the taxpayer will have to pay for again.”

OUTA made submissions to NERSA earlier this year, challenging the tariff increases.

McDaid continued: “We see that NERSA has listened to the public and disallowed more than half of the revenue Eskom wanted. It also has not allowed Eskom to claim most of the money it wanted to refund it for its use of expensive diesel peaking power plants.

“However, if Eskom had managed its operations effectively, it would have kept up its maintenance.  This didn’t happen, and customers should not have to pay for Eskom’s bad management.”

No date as yet for increase in electricity prices

While NERSA says they took civil society submissions into account before granting this additional increase, the regulator at the time of publishing failed to provide reasons for the decision.

“We believe it is essential that NERSA provides rational explanations and feedback for their decisions, if indeed they want civil society to understand and have faith in their work,” read the OUTA statement.

South Africa is witnessing a significant impact on the economy due to the lockdown and COVID-19 pandemic, and OUTA believes fewer people will be able to pay for electricity in future.

Julius Kleynhans, Strategy and Business Development Executive at OUTA, warned: “Businesses are closing, and people are losing their jobs as a result of the lockdown, yet Eskom and NERSA find reasons to push up prices without reasonable explanation to society. We find this unacceptable.”

It is also not clear when the 6.5% increase will come into play; however, OUTA looks forward to seeing how NERSA made their decision, concluded the statement.

Author: Nicolette Pombo-van Zyl

This article was originally published on ESI Africa and is republished with permission with minor editorial changes.

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