Eskom has a proposal before the National Energy Regulator of South Africa to hike electricity prices by a rumoured 44% for the 2024/2025 financial year.
(Waldo Swiegers/Bloomberg via Getty Images)
Eskom has a proposal before the National Energy Regulator of South Africa (Nersa) to hike electricity prices by a rumoured 44% for the 2024/2025 financial year.
The Daily Maverick reported recently that customers relying on electricity supply from municipalities would be hit hard as Eskom is considering increases of 43.55% in 2026; 3.36% in 2027 and 11.07% in 2028, with the first increase set to be implemented on 1 July 2025. These price hikes would see the utility collecting revenue above R400 billion for each year.
It also reported that there is a request to Nersa for an increase of 36.15% in the standard tariff that it charges non-municipal customers during the financial year 2026, 11.81% in 2027, and 9.10% in 2028.
This year Nersa approved a 12.74% tariff increase which kicked in from April. A 40% hike in the electricity price is unmanageable for most South Africans. People can barely afford the cost of living now. This type of price hike would affect poor and middle-income households the most.
Eskom and Nersa regularly disagree on tariff hikes with Eskom generally receiving less than the requested tariff hike. This was often the case in the past few years. The power utility has constantly argued that revenue sales in electricity are not enough to cover its debt. The plan to open up the electricity market as part of the Electricity Regulation Bill which has recently passed through the National Council of Provinces means it will struggle to make up revenue as electricity will not be monopolised by Eskom.
But Eskom is staying mum on this request to Nersa. In its recent summer outlook briefing, a question was posed to Eskom heads on the tariff. Calib Cassim the chief financial officer said that the utility consults with the South African Local Government Association and the national treasury before submitting to Nersa. He confirmed that a submission was made to Nersa for multi-year price determinations. Only once Nersa publishes the tariff request does the utility publish and open up discussions, he said.
The tariff hike would be for generation, transmission and distribution of electricity.
Minister of electricity Kgosientsho Ramokgopa has said before in his updates that the situation is unmanageable for most consumers, implying that people will have to balance keeping the lights or buying food.
It’s clear that the minister acknowledges that the tariffs are high and higher tariffs are unaffordable for most people. He has indicated that the price of electricity has increased by almost 400% in the past 10 years. South Africa has one of the highest rates of electricity. It is higher than countries such as Brazil, China, India and the United States.
MyBroadBand has also reported that South Africa’s residential electricity prices are well above the average tariff in 144 countries and more expensive than in most African countries, according to GlobalPetrolPrices.
For a country with such high unemployment rates, these prices have to become more affordable. But aside from saying innovative solutions are needed, nothing else is being done to lower these prices.
Financially, Eskom has battled a growing municipal debt leaving it requiring bailouts from the treasury. This means that electricity consumers face a serious burden paying for electricity. In previous years when load-shedding was rife, diesel was used to run open-cycle gas turbines at great costs, often in the billions. This would undoubtedly affect the price of electricity.
But this year, load-shedding has come down significantly, with more than 150 days of no power cuts. That means the use of diesel has significantly gone down. Yet, the alleged tariff hike remains.
The alleged tariff hike has reached some important ears. The Democratic Alliance (DA) has written to parliament to debate the hike which was approved by National Assembly speaker Thoko Didiza. It has also written to Nersa to protest such a hike.
The party believes the hike is exorbitant and will severely affect the average South African.
Nersa has confirmed that Eskom has put in a request for a tariff hike without confirming how much. It has said in a statement it will be handled properly with consultation and transparency.
Nersa’s head of electricity regulation Nhlanhla Gumede has recently been in the news as well. He recently said the regulator made a crucial mistake in the past regarding the approval of tariff increases. He said the prices were regulated according to Eskom’s revenue instead of the cost of the supply.
The regulation of these tariffs has also been questioned by Ramokgopa who has called for the methodology to be reviewed. This cannot happen soon enough as South Africans can ill-afford such high tariff hikes. It needs urgent addressing or electricity will only be affordable for the rich.