Electricity prices in South Africa are expected to increase significantly after the National Energy Regulator of South Africa (Nersa) admitted to procedural mistakes in its revenue and regulatory clearing account decisions.
The mistakes by Nersa include considering a R69-billion Eskom bailout by the government as revenue, and regulatory clearing account decisions.
Eskom told MyBroadband that Nersa has made mistakes in all its revenue and regulatory clearing account decisions since December 2017.
Nersa has subsequently withdrawn its opposition to two court applications from Eskom to allow it to recover this money through electricity price increases.
This opens the door for Eskom to implement price increases that are much higher than the previously approved 8.10% and 5.22% for the 2020/21 and 2021/22 financial years.
Rapport reported that Eskom said in an online court sitting that it wants to increase prices by 15% next year.
Eskom told MyBroadband that the report is correct and that any price adjustments will likely be from 1 April 2021 onwards.
It added that the outcome of the court processes, expected between June and July 2020, and further Nersa decisions will determine the price of electricity going forward.
South Africa has cheap electricity – Eskom
Eskom said the consumer has continued to be subsidised by either Eskom’s balance sheet or by the taxpayer due to the nature of the decisions.
“Thus, the electricity consumer has not further migrated towards what the efficient price of electricity is,” Eskom said.
Eskom added that it has not been able to recover its efficient and prudent costs.
Eskom spokesperson Sikonathi Mantshantsha told ENCA the unfortunate situation is that electricity costs a lot of money to produce.
“By international comparisons, Eskom’s prices are much lower than they should be if you compare it to the rest of the world,” said Mantshantsha.
“You are paying about 40% less for electricity in South Africa than you would elsewhere.”
He added that the situation is aggravated by the high number of non-paying customers, which places an additional burden on paying customers.
“That is the unfortunate situation that we have. Large parts of South Africa are bluntly refusing to pay for electricity, which places a lot of burden on people who are paying for their consumption,” said Mantshantsha.
He said what the country needs is for non-paying customers to come to the party to reduce the load on people who are paying.
Eskom inefficiencies addressed
Mantshantsha admitted that Eskom has many inefficiencies which have impacted electricity supply, reliability, and pricing.
Last year, Eskom Chief Operating Officer Jan Oberholzer admitted that productivity at Eskom is much lower than what it used to be and that this is a big concern.
He said that 11 years ago, Eskom employed less than 30,000 people. This is now sitting at 44,000 employees, while the company is also paying for contractors to keep the lights on.
One of the ways to measure productivity and the efficiency of a power utility like Eskom is to look at the power generation per employee.
In 2004, Eskom produced 232,443GWh of electricity with 31,475 employees. Fast-forward 15 years and Eskom is now producing 218,939GWh with 46,665 employees.
This lower productivity and inefficiency comes at a cost to electricity consumers in South Africa, who have to cover the increased costs through higher electricity prices.
Mantshantsha said they are the first to admit that there are problems at Eskom which need attention.
“Nobody who lived in this country for the past 10 years can deny that Eskom has not been at its best. We are doing everything we can to fix the company,” he said.
He said they are actively addressing inefficiencies at Eskom and ensuring the company is “working correctly”.