Big Eskom price hikes just pay for more theft — analyst

Energy analyst Clyde Mallinson has warned of further electricity price increases due to Eskom having to cover the cost of increasing theft and wasteful expenditure.

The National Energy Regulator of South Africa (NERSA) has implemented an average increase in the electricity tariff of 18.65% for the 2023/24 financial year and a 12.74% increase for the following year.

The increase will take effect from 1 April for clients that source their electricity directly from Eskom, while municipalities will increase their prices from 1 July.

This is despite a plea from President Cyril Ramaphosa in January 2023 for the suspension of tariff increases due to heightened costs of living and increased load-shedding severity.

In response to his plea, Eskom went back to NERSA to discuss how to apply the increase across different socioeconomic groups in an attempt to soften the blow on the poorest in society.

This discussion resulted in the increase being staggered across socioeconomic divides, with lower-income customers in certain areas facing an increase of only 10%.

To alleviate the burden on the poor, the affordability subsidy paid by industrial and urban customers will increase by nearly 30% to 7.37c/kWh. This cost is additional to the tariff charged.

Eskom had originally asked for a 32% increase for 2023/24 as part of its push for “cost-reflective tariffs”.

However, experts question whether these tariff increases reflect the costs to produce electricity or the costs of mismanagement and theft at the utility.

Reflective of what?

Clyde Mallinson, an energy analyst at Virtual Energy and Power, questioned which costs the electricity tariff is reflective of in an interview on 702.

Eskom’s tariff increases have significantly outstripped inflation since load-shedding began in 2008, with the tariff increasing by 653% over the last 15 years while inflation increased by only 129% over the same period.

Source: Power Optimal

According to Mallinson, disproportional increases in the electricity tariff are due to Eskom having to recuperate capital lost through theft and wasteful expenditure, not the increased cost of producing electricity.

For example, if former Eskom CEO Andre de Ruyter’s figures are accurate, Eskom has to make up a R1 billion a month loss to theft.

Due to an inability to fight corruption, the utility can only do this through tariff increases.

Mallinson also highlighted wasteful expenditure associated with Eskom’s Risk Mitigation Program, resulting in R8 billion a year in unanticipated costs.

Therefore, Eskom has to make up R20 billion a year which is lost to theft or wasteful expenditure.

Mallinson said he has no sympathy for Eskom when it asks for cost-reflective tariffs. Instead, he asked, “Reflective of what? Reflective of theft and wasteful expenditure?”.


This article was first published by Daily Investor and is republished with permission.

Now read: Eskom’s coal power stations are in big trouble

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Big Eskom price hikes just pay for more theft — analyst