Expect more electricity price hikes

Efficient Group chief economist Dawie Roodt said South Africans should expect more electricity price increases as Eskom’s financial position continues to deteriorate.

Roodt told SABC News that Eskom’s massive price increases over the past few years were implemented because the utility is “in very, very deep trouble financially”.

His comments came after Eskom confirmed that it would implement its annual price increase at the start of April.

The National Energy Regulator of South Africa (Nersa) granted Eskom a 12.74% increase for its direct customers, combined with a 25.64% affordability subsidy.

“The average increase applied to the key industrial and urban tariffs will be 13.29% due to the increase in the affordability subsidy charge,” Eskom stated.

“The affordability subsidy charge is raised as a subsidy to the Homelight 20A tariff and is determined by Nersa.”

“This charge exists due to historically lower Homelight 20A tariff increases and is paid by the non-municipal large industrial and urban tariffs.”

Nersa also granted a 12.72% increase to municipal customers. “I think it’s completely, totally incorrect for Eskom to increase electricity prices by this huge margin,” Roodt said.

“They’ve been increasing electricity prices for many years now, and still, Eskom is in deep financial trouble, so it’s simply not working.”

Eskom reported that its net loss increased to R23.9 billion in the last financial year — a significant jump from the R11.9 billion loss reported in the previous period.

This was the company’s seventh consecutive loss as Eskom crumbled under the weight of its debt pile, high financing costs, poor plant performance, and a ballooning municipal debt.

The utility’s chairman also recently said he expects another over R20 billion for this financial year.

Eskom has had to spend increasingly more on diesel over the past few years as the utility’s coal power plants cannot keep up with demand, and it has to use its diesel-powered open-cycle gas turbines to subsidise supply.

In addition, one of Eskom’s biggest challenges is that it is losing sales and, therefore, revenue as load-shedding intensifies and people increasingly turn to alternative energy sources.

To make up for these lost sales, the utility implements above-inflation tariff hikes, like the one seen at the start of April.

The effect of these increases can be seen in Eskom’s 2023 results — the utility’s revenue rose by 5% despite declining sales, yet it still made a massive loss.

Roodt warned that this is unsustainable, and Eskom will continue to hike electricity prices as its financial health continues to deteriorate.

“I can promise you, we’re going to see more electricity price increases as long as Eskom is managed in the way it is managed and as long as Eskom has this huge outstanding debt and as long as Eskom keeps on making losses — and they will keep on making losses.”

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