Fighting Eskom’s 19% increase could lead to even bigger price hike, warns expert

[Nat Quinn]

The National Energy Regulator of South Africa’s (Nersa) approved 18.65% electricity tariff hike for 2023 can only be altered through legal action, which could result in an even higher increase.

The price increase is set to take effect on 1 April 2023.

According to energy policy and investment advisor Anton Eberhard, South Africa could face a higher electricity price increase if a court ruled that Nersa didn’t follow the correct methodology.

“SA’s power utility @Eskom_SA⁩ reminds the president that ⁦@NERSA_ZA⁩ alone sets the tariff & [the] 18.65% increase can only be altered via a legal challenge,” Eberhard said.

“But if [the] court decides [the] regulator didn’t follow its methodology, an even HIGHER increase is likely!”

Several groups have launched legal cases against South African energy industry institutions.

These include an interdict application from South Africa’s official opposition, the Democratic Alliance (DA), to block the electricity tariff increase that Nersa approved.

President Cyril Ramaphosa has also gone so far as to appeal to the Eskom board to delay its electricity price increase.

News24 reports that the power utility responded to Ramaphosa, saying Nersa is the only entity that sets the electricity price tariff and that price hike could only be altered through a court application.

Eberhard was referring to this report in his comments.

“Neither Eskom nor any other authority can determine electricity prices, Nersa cannot change its own decision unless reviewed in a court of law,” Eskom stated.

“Once a decision has been made, Nersa lacks any power to re-examine its decision. Charging any price other than that determined by Nersa is not legally possible.”

Calib Cassim, Eskom chief financial officer

Eskom welcomed the Nersa-approved tariff increase despite being substantially lower than the 32.05% it asked for.

However, various political parties and worker’s unions have launched a legal case to end load-shedding and stop the energy regulator from raising power prices.

The various parties — including the United Democratic Movement, Build One South Africa, the Inkatha Freedom Party, and the National Union of Metalworkers of South Africa — filed a lawsuit this week demanding that the tariff hike be suspended.

It is also asking for the shutdown of coal power stations in the next few years to be reconsidered.

Other demands in the lawsuit include:

• Certain service providers and industries must be exempted from load-shedding — including hospitals, agriculture, and small businesses.

• Eskom must provide notice of its load-shedding plans and allow electricity users to provide feedback on those plans.

• Public enterprises minister Pravin Gordhan and Eskom must submit a plan to the court explaining how load-shedding will be brought to an end.

• Ramaphosa must table a plan to lower the impact of load-shedding on the economy and society. In addition, the president must release the details of agreements with foreign governments on funding secured for the reduction of South Africa’s coal reliance for electricity generation.

• Ramaphosa and Gordhan must be found to have breached the constitution, based on infringements to South Africans’ rights to health and education.

The DA launched its own legal case against the approved tariff hikes on 20 January 2023 and marched to the ANC’s Luthuli House in Johannesburg on Wednesday in protest against load-shedding.

“The DA rejects this astronomical increase,” it said.

The political party wants the court to prohibit Nersa’s approval of the almost 19% price hike because it will make it impossible for some of the nation’s residents to afford power.

Eskom said it needed the extraordinarily high increase due to the following factors:

• Depreciation of 10.67% resulting from Nersa revamping Eskom’s assets in its 2023 price adjustment decision, particularly relating to assets in its generation business.

• The utility’s primary energy costs are predicted to increase by 7.8%, the majority resulting from increased diesel and fuel oil prices and higher usage of these products for Eskom’s open-cycle gas turbines (OCGTs).

• The cost to procure electricity from independent power producers would increase by 9.05% due to more reliance on private power, including for emergency generation.

Nersa approved revenues of R318 billion for the 2023/4 financial year and R352 billion for the 2024/5 financial year.

Fighting Eskom’s 19% increase could lead to even bigger price hike, warns expert (mybroadband.co.za)

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