Eskom price double-blow

If Eskom gets its way, many South African households consuming low to moderate amounts of electricity every month will see their bills increase by over 50% from next year.

That could become a reality if the utility’s recent tariff-related applications to the National Energy Regulator of South Africa (Nersa) get the green light.

The first is the sixth multi-year price determination (MYPD6) application for its regular annual electricity tariff adjustments.

Eskom has requested an astounding average increase of 36.15% for its direct customers from 1 April 2025 and a 43.55% hike for municipalities effective 1 July 2025.

It is also seeking additional above-inflation increases in 2026 and 2027.

Eskom said the hikes are necessary to ensure its tariffs were reflective of its operating costs.

However, the power utility’s electricity production costs have skyrocketed well beyond inflation in the past decade, due to corruption, mismanagement, a bloated workforce, and ballooning debt servicing costs.

Daily Investor has calculated that the utility’s tariffs would have been 75% lower had they increased with inflation from 2006.

The power utility has blamed the high hikes on Nersa for previously rejecting Eskom’s applications to collect certain revenues as part of the controversial Regulatory Clearance Account (RCA) mechanism.

The RCA is a clawback system that allows Eskom to increase future tariffs based on historical shortfalls in expected revenue.

It effectively guarantees that Eskom will be allowed to collect all the revenue it needs to align with its costs, so the utility is not incentivised to keep costs under control.

Even though Nersa granted far lower increases than Eskom had requested, the hikes have still been well above inflation over the past decade.

Major tariff restructuring proposal with devasting consequences for small power users

While the 36.15% and 44.55% hikes are already bad news for all electricity users, low to moderate users may have to brace for even bigger bills from next year.

The second tariff-related application currently under Nersa’s consideration is Eskom’s 2024/25 retail tariff plan (RTP).

The RTP proposes a major shift in the balance of fixed and variable charges’ contributions to the utility’s revenue.

Eskom argues that customers like grid-tied solar users who consume small amounts of electricity and use the grid as a “battery” are effectively subsidised by those who consume large amounts of electricity.

To compensate for this, Eskom wants to introduce a generation capacity charge that will significantly increase the cost of merely having a grid connection.

Eskom argues that the RTP application is not for higher tariffs and will not increase its overall revenue collection.

The power utility has said that the “average” electricity user will be paying less with just the RTP adjustments.

MyBroadband’s analysis of the RTP using Eskom’s own price change tool for the utility’s most common Homepower 4 tariff plan found that residential customers consuming less than about 764kWh will be paying more under the RTP.

Data from various sources suggest that South Africa’s average household consumption is far less than this.

Therefore, many lower and middle–income households that don’t qualify as indigent will be negatively impacted by the change.

MyBroadband calculated the combined impact of the MYPD6 and 2024/2025 RTP and found that all customers consuming 650kWh or less would be paying over 50% more than currently.

A household that has solar power and can meet all its electricity demands with its own generation will be paying R867 instead of R225 — 285% more than currently.

A household that consumes the roughly 200kWh average that MyBroadband recently calculated will pay 101% more, about twice its current electricity bill.

Users with 450kWh monthly consumption — which some solar installers have estimated to be the average usage in the country — will pay 67% more.

Nersa stopped accepting public inputs on the MYPD6 on 1 November 2024 and recently also completed public hearings on the application.

It plans to make its decision on the application on 20 December 2024 but the public announcement date remains to be confirmed.

However, Nersa is still accepting public comments on the RTP via email at [email protected] until 16:00 on 17 December 2024. It plans to make its decision on the RTP by the end of January 2025.

The table below summarises how much more Eskom Direct customers on Homepower 4 will pay if both of Eskom’s applications were approved in their current form.