D-Day for massive Eskom price hikes in 2025

Nersa’s electricity subcommittee has made its recommendations to the Energy Regulator on its application for an effective 66% electricity price hike over the next three years.

However, the subcommittee WALKED BACK ON 2024 DECISION BY NERSA  to be fully transparent about its recommendations on Eskom price hikes, keeping the latest numbers hidden from the public.

In March 2024, Nersa announced its decision to fully disclose all proposed tariff hikes and decisions in “high-profile” matters to the public.

This included decisions by its subcommittees, including the Electricity Subcommittee, around exact numbers—for example, the total percentage of allowed tariff/revenue being recommended to the Energy Regulator for approval.

However, at a special extended meeting on Tuesday (21 January), the subcommittee elected to keep the numbers for 2025, 2026, and 2027 confidential.

Nersa previously stated that subcommittees could pass a resolution to withhold information due to legal constraints. However, no specific legal constraint was raised during the meeting.

The committee said it was not withholding the numbers to hide anything, but rather because it did not want to prejudice any committee members or mislead the public by focusing on non-finalised numbers.

It stressed that its recommendations would likely be adjusted—for the environmental and carbon levies in particualr—and do not constitute an administrative action.

Thus, it followed its historical process, keeping its recommendations hidden and leaving the final announcement to the Energy Regulator.

The committee accepted the hidden recommendations at the end of the meeting.

The Energy Regulator is expected to make the final decision soon, previously committing to an announcement before the end of January 2025.

In September 2024, Eskom officially tabled its Multi-Year Price Determination application (MYPD6) for 2025, 2026, and 2027.

The utility applied for an effective 66% tariff hike over the period, the bulk of which would have been for 2025:

• 36.15% on April 1, 2025;

• 11.91% on April 1, 2026;

• 9.1% on April 1, 2027.

Through the tariff hikes, Eskom wants to raise R446 billion for FY2026, R495 billion for FY2027, and R537 billion for FY2028 from its customers.

Discussing its decision on Eskom’s application—without revealing any numbers—the committee did indicate that it made recommendations to adjust Eskom’s application downward, such as amounts related to capital expenditure and other transfers.

Adjustments were also made to Eskom’s coal costs, fuel costs, the use of Open-Cycle Gas Turbines, and employee costs and salary increases, among others.

However, there was no indication as to the extent of the adjustments.

South Africa is not in support

Eskom has faced significant backlash from businesses, communities, households, and political leaders over the hikes, which they call untenable and unsustainable and directly contributing to a cost-of-living crisis in the country.

Energy minister Kgosientsho Ramokgopa has repeatedly spoken out against the tariff hikes, promising government intervention.

So far, the promised interventions seem focused on lower-income households and longer-term processes.

For the former, the minister said that the government is looking at expanding its Free Basic Electricity (FBE) policy, boosting free usage from 50 kWh to 150-200 kWh.

Over the longer term, the minister argued that improving Eskom’s finances, particularly with the R250 billion aid from the government to handle its debt, will improve the utility’s credit standing, leading to easier access to financing.

“Lower financing costs directly translate to the containment of Eskom’s cost-reflective tariff, ensuring prices remain within the affordability of end customers,” he said.

Unfortunately, neither of these interventions directly deal with one of the biggest crises at the heart of the escalation in price hikes: municipal debt.

Eskom itself has warned that if municipal debt is not dealt with—that is, municipalities failing to pay for the electricity they use—then the burden will continue to fall on customers who do pay.

According to Ramokgopa, the municipal issues are an existential crisis for the country, and the repeated pushing costs onto paying customers poses a national security risk as the likelihood of social unrest increases.

Reporting its annual financial results in December, the group remarked that municipal debt was heading toward R110 billion in 2025.

If not addressed, Eskom said this would counter the government’s debt bailout and would likely see the group back at the Treasury begging for aid.

SOURCE:D-Day for massive Eskom price hikes in 2025 – BusinessTech