South Africans are likely to experience large increase in electricity prices: Expert

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Energy Expert, Sampson Mamphweli says South Africans are likely to experience a large increase in electricity prices in the following financial year.

This after Energy regulator, National Energy Regulator of South Africa (Nersa), granted Eskom a 9.61 increase for the upcoming 2022/23 financial year.

It will come into effect on the first of April. Eskom had initially asked for a 20-point-five percent increase. Mamphweli says Eskom still needs to recover billions of rands.

“Looking at this, I see us having a much bigger increase next year than the 20.5% that Eskom had requested and I see Eskom coming back with a much bigger regulatory account because there is the +/- 14bn rand that Eskom needs to recover in the following financial year and that is going to come back to haunt the consumers.”

Nersa grants Eskom 9.6% tariff increase

The municipal increases will come into effect from July while for Eskom customers the increase will be from April.

Nersa says the R5.6 billion which is owed by government departments needs to be paid.

“As you would know, you have to add all approved RCA’s when those are added then the increase becomes 9.61%. Eskom had applied for revenue which was much higher than this,” explains Nersa’s Regulator Member for Electricity Nhlanhla Gumede.

Support from government

Delivering his Budget Speech on Wednesday, Minister of Finance Enoch Godongwana announced that Eskom will be receiving support from the government as it remains in financial distress.

“To date, Eskom has been provided with R136 billion to pay off its debt with a further R88 billion until 2025/26. We acknowledge, however, that Eskom is faced with a large amount of debt that remains a challenge to service without assistance. The National Treasury is working on a sustainable solution to deal with Eskom’s debt in a manner that is equitable and fair to all stakeholders. Any solution will be contingent on continued progress to reform South Africa’s electricity sector and Eskom’s own progress on its turnaround plan and its restructuring. We expect Eskom to take further steps towards cost containment, conclude the sale of assets and implement operational improvements to enhance the reliability of electricity supply.”

Minister of Finance Enock Godongwana’s Budget Speech: 

Paying off debt

When he appeared before a Joint Committee of Public Enterprises and the Select Committee on Public Enterprise and Communications this week,  Eskom Chief Executive Officer Andre de Ruyter said nearly R380 billion revenue has to be recovered by the power utility.

He said the arrears, which resulted from adverse tariff decisions, almost amounts to the outstanding debt owed by Eskom.

“We are very aware of the negative impact of the above-inflation tariff increases has on the economy, on households but also on business and industry. Unfortunately due to a number of adverse tariff decisions which we have successfully challenged in court, we are now in a position where we have to play catch up, and that results in a backlog of just under accumulatively R380 billion revenue that we need to recover and it’s not coincidental that this amount of revenue that is in arrears due to adverse tariff adverse decisions, is very close to the total outstanding debt of Eskom.”