Eskom price hike will hit residents hard
The increase would cause immense financial strain for all residents across the city.
Eskom’s 15% electricity tariff increase to recover R16-billion of its allowable revenue in the 2021/22 financial year will hit Tshwane residents hard when its implemented.
The increase come as Eskom and National Energy Regulator of South Africa (Nersa) reached an agreement that R10 billion of R23 billion be recovered through tariff increases in their legal battle. Eskom took Nersa to court as it believed that it lost revenue as the regulator approved lower tariffs than what they applied for over the years .
Residents supplied by municipalities would only know the true impact of Eskom’s hike in prices in July when the municipality financial year begins.
According to Tshwane metro chief of staff Jordan Griffiths the increase would cause “immense financial strain for all residents across the metro.”
“It will be directly passed through to customers as they are approved nationally.”
According to him, the municipality will only know the true impact of the increase once the municipal tariffs guidelines are issued by the National Energy Regulator of South Africa (Nersa), which will be subject to a public hearing.
At the time the price hike was announced, Griffiths said the metro was busy working on national treasury guidelines for an electricity tariffs increase of 5.22%.
Griffiths said that the metro purchased all its bulk electricity from Eskom.
“It is unfortunate that they are forcing such high double-digit increases on people in the country, particularly during this difficult economic climate,” he said.
“The municipality will, however, continue to explore options to make it less dependent on Eskom.”
One such initiative is an embedded power generation policy that will allow consumers to take themselves off the electricity grid.
He said the municipality would also continue offering free electricity to poor households.
The increase might, however, do more harm to Eskom than good, seeing the struggling state-owned entity going deeper into debt.
This was according to energy expert Chris Yelland.
“Eskom thinks that by increasing the price of electricity, it is going to increase revenue; but it’s not. If you put your price up, people will use less of your product. Instead, they will make arrangements to start using the product as little as possible.”
Yelland said the price hike could push people to start looking for other energy alternatives such as renewable energy and gas.
“The sales volumes at Eskom will thus go down. This means they would need to apply again for the prices to go up to compensate for the sales going down, falling into a spiral of rising prices and dropping sales. The impact will be severe on both Eskom and the economy.”
Yelland said with the price hike being five times more than the inflation rate (3.88%), it would see businesses under pressure and could slow down economic growth.
“It will make our products less competitive in international markets. It will also have a knock-on effect on finances on an individual level, business and industrial.”
Yelland said Eskom should look beyond increasing prices and rather consider reducing costs such as the ever-increasing cost of coal. It should also look at saving on staff salaries and consider downsizing.
“Already municipalities have a hard time collecting from their customers because their customers do not have a lot of disposable income.”
In November last year, the Tshwane metro said it was owed R12-billion by residents and business customers.
Yelland said lack of revenue collection from municipalities would see them not being able to pay Eskom.
The increases come as a court battle between Nersa and Eskom over tariff increases continues.
Last year, the court ordered that Eskom should be permitted to recover R23-billion that could translate to price hike of more than 22%.
Nersa spokesperson Charles Hlebela said they reached the agreement of the R10-billion of the R23-billion recovery to avoid a possible severe increase that would have a severe impact on municipalities and customers.
The case is still pending as Eskom fights to recover the R23-billion owed to it.
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