Chris Ndaliso
Senior journalist
5 minute read
20 Jul 2022
07:38

Fury at Eskom proposed hike

Chris Ndaliso

The power utility has lodged an application to charge more for electricity.

Eskom’s latest tariff application for a 32,7% increase in the price of electricity could translate into a “utility death spiral” of more illegal connections and a loss of revenue to municipalities.

The power utility has, despite the economic challenges caused by different events which have left a trail of devastation around the country, lodged an application to charge more for electricity.

The Pietermaritzburg and Midlands Chamber of Business (PMCB) said there was no way that an increase of 32,7% could be accommodated by the private sector at this point.

Chief executive Melanie Veness said having been hit by Covid-19 restrictions, the July unrest, flooding and unrelenting load shedding, businesses were battling to keep their doors open.

“We don’t have the money to fund this. The cost will be jobs. The electricity supply industry is in a complete mess. Eskom is not sustainable because they’re not able to right-size the organisation, the rampant theft of electricity is not addressed and they’re not being paid by municipalities — all things that the shareholder seems unwilling to address.

The government cannot keep kicking the costs for these inefficiencies down the line and expecting us to fund them. The regulator needs to ensure that only efficiently incurred expenditure in the application is allowed

The National Energy Regulator of South Africa (Nersa) confirmed receipt of the application but said the process of dealing with it was at a very early stage.

Nersa media relations officer Poppie Mahlangu said they were still finalising internal processes before they could comment on the matter.

“The application still needs to get through to the electricity committee and then we will publish the consultation papers. We as Nersa need to come up with our own timelines for the entire process,” she said.

Msunduzi Municipality would not be drawn to comment on the proposed hike, with spokesperson Ntobeko Mkhize saying the municipality will await the Tariff Guideline from Nersa.

eThekwini Metro, however, expressed its displeasure with the proposed increase, saying it means a loss for municipalities as it will very likely lead to increased illegal connections.

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Spokesperson Msawakhe Mayisela said the entire distribution industry is caught up in what is commonly called the “utility death spiral”.

“What this essentially means is that the higher the cost of electricity, the less is sold as customers move onto reducing their electricity consumption by adopting energy efficiency measures, moving over to solar and increases in theft.

“As in any other industry, a drop in sales results in a drop in revenue, resulting in the business needing to do more with less. This is no different for the municipality and we can expect less spend on maintenance and upgrading of infrastructure as utilities come under pressure. Coupled with this, external factors such as the recent rioting and floods, high unemployment, high cost of living, and signs of a recession on the horizon creates the perfect storm,” said Mayisela.

He said on average 70% of electricity revenue goes towards purchasing electricity for distribution to municipal customers, so any increase by Eskom has a high impact on the cost per unit of electricity. “Whilst we can appreciate that Eskom needs the revenue, the burden cannot be continually carried by the end customer,” he said.

Abahlali Basemjondolo said if the hike gets approval they will intensify their “People’s Connection” campaign.

This means using any means to get people connected to the grid. Abahlali president Sbu Zikode said the proposal was shocking as the citizens were still in a bad financial state following the fuel hikes and skyrocketing cost of living.

Zikode said if Eskom was indeed a state-owned entity, then the government does not care for the citizens.

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“This compels us to get out of our comfort zones and oppose it. We have to intensify our push for the connection of people onto the grid as the government has been failing to provide for our residents,” said Zikode.

The DA’s mineral resources and energy spokesperson Kevin Mileham (MP) said the proposed hike was immoral and an insult to South Africans who have endured possibly the worst load shedding schedule so far this year.

“We will submit our objections to this proposed Eskom rip-off once Nersa opens public comments on the first of August.

“Citizens are already struggling to stay above water due to rising costs of living and a high inflationary environment. For Eskom to add an additional high electricity tariff increase for a service that they cannot provide is simply unacceptable,” he said.

Move to charge solar users R938 per month

Eskom’s plan, through its latest tariff application to Nersa is to require that on-grid solar users pay R938 per month even if they don’t use its electricity, is extortionate and violates consumer rights.

That’s according to Kevin Mileham (MP), the DA shadow minister of mineral resources and energy, who said on Tuesday that instead of incentivising small scale embedded generation to relieve pressure on the grid and alleviate load shedding, Eskom appears determined to punish homeowners and businesses who want to install solar systems as an alternative power source.

Mileham said this is “regressive and negates every claim that the government has said about opening up the grid to independent power producers”.

He said faced with the prospect of assured relegation to the fringes of South Africa’s electricity market, due to its own inefficiencies and moribund business model, Eskom now wants to hang on to its failing monopoly through consumer extortion.

Eskom’s R938 tariff charge on solar users has laid bare the chaos that is currently prevailing in President Ramaphosa’s government on the energy front. Recently we were told that the National Planning Commission in the President’s Office recommended the opening up of the energy sector to renewable energy to solve the energy crisis.

“In fact, media reports indicate that this is exactly what Ramaphosa will announce in his measures to address the energy crisis. The question then, is how does the president and his government plan to accomplish this when they are making it extremely expensive to promote rooftop solar generation?

“If Ramaphosa is serious about solving the load shedding crisis in the shortest possible time, he would immediately reject this R938 extortion fee on solar users,” said Mileham. Instead, solar installation incentives should be announced to ensure that more people are motivated to consider solar energy as an alternative to Eskom’s unreliable power supply, he said.