Cape Town rejects ‘unconscionable’ Eskom tariff hike

The National Energy Regulator (NERSA) is once again in the spotlight, facing pressure to reject Eskom’s latest proposed tariff hike. As part of a three-year-old Multi-Year Price Determination (MYPD), this year’s tariff increase was 12.8%. However, South Africa’s power utility is now seeking an even larger increase for the future, nearly three times higher.

But even the latest 12.8% increase that came into effect back in July is considered illegal. It was challenged because municipalities did not do any Cost of Supply (COS) research to come to the figure. Following NERSA’s appeal being denied in High Court last week, the latest Eskom tariff increase is therefore null and void and AfriForum argues millions of residents are entitled to a refund. The regulator has taken leave to study the court’s findings.

ESKOM TARIFF INCREASE

Nevertheless, another proposed Eskom tariff increase has found its way onto NERSA’s desk. And Cape Town mayor Geordin Hill-Lewis is not happy about it, reports TimesLive. According to Hill-Lewis, Eskom has not formally submitted the application yet. However, he says: “Early consultations reveal their intention for a 44% hike to municipalities, and a 36% increase to direct Eskom customers”.

In a letter directed to NERSA, the mayor explained he was strongly opposed to the Eskom tariff increase. “This is a mammoth Eskom increase. It is unthinkable. On behalf of Cape Town, we are calling for the rejection of this proposed 44% electricity tariff hike. The economic impact, especially on lower-income families and small business, will be devastating,” explained Hill-Lewis.

LEGACY OF MISMANAGEMENT

Currently, the power utility is enjoying 150 days without load-shedding – a run that’s anticipated to last all summer. Nevertheless, Hill-Lewis says the increase is due to: “The parastatal’s poor operational choices, including the legacy of mismanagement and corruption. We believe the power utility can improve its efficiency, reduce costs and develop new revenue streams rather than passing this huge Eskom tariff increase on to consumers who are struggling.” Eskom’s total debt has increased by 2%, from R389 billion in 2022 to R399 billion, according to its last financial results published in March 2023.

As a way to skirt around the proposed Eskom tariff increase, Cape Town is purchasing power from the open market. Likewise, it will invest R4 billion in electricity grid upgrades over the coming years. “We know the fine detail of what it costs to operate a future-focused electricity service. Eskom only accounts for 70% of our buying costs, however, even at the amount there’s no way we can absorb this unconscionable 44% increase.”