By Thabo Mosia
The National Energy Regulator of South Africa (Nersa) has published Eskom’s latest multi-year revenue application, covering the financial years from 2025 to 2028. The application, which has garnered significant public attention, outlines Eskom’s projected revenue needs and proposes a series of tariff increases to address rising operational costs and infrastructure challenges. With public submissions open until 1 November 2024, South Africans are urged to have their say on the potential impact this application may have on electricity prices and overall economic conditions in the country.
Eskom’s Revenue Application:
Eskom has applied for substantial tariff increases, with a proposed average hike of 36% for the 2025/2026 financial year. This request is driven by rising costs associated with primary energy, including coal and diesel, as well as increased investment in independent power producers (IPPs). The application aims to address Eskom’s ongoing financial struggles, exacerbated by load shedding, outdated infrastructure, and debt .
The multi-year application is part of Eskom’s effort to ensure the financial sustainability of the power utility while making necessary investments to improve its energy availability factor (EAF), which has consistently fallen short of expectations. Eskom is under pressure to increase the EAF above the current 59%, as continued low performance has contributed to frequent load shedding .
Public Participation Process:
Nersa’s decision to open public consultations has been welcomed by many, as electricity consumers—both residential and industrial—have expressed concerns over the long-term affordability of electricity. The regulator has stated that it will ensure utmost transparency in evaluating Eskom’s application and invites stakeholders to submit their comments by 1 November 2024. Public hearings will also be held to provide a platform for discussion .
Key Factors Behind the Tariff Increases:
Eskom’s revenue application outlines several key factors contributing to the proposed tariff increases:
1. Primary Energy Costs:Eskom has cited significant increases in fuel costs, particularly for diesel, which is used to power open-cycle gas turbines (OCGTs) during peak demand periods. The utility’s over-reliance on OCGTs has been a point of contention, as these plants are costly to operate, leading to higher electricity tariffs for consumers .
2. Independent Power Producers (IPPs):
Another major cost driver is Eskom’s procurement of electricity from IPPs. While the inclusion of renewable energy sources is part of South Africa’s broader energy strategy, the cost of emergency procurement from IPPs has placed additional strain on Eskom’s finances .
3. Depreciation and Maintenance:
Eskom’s aging coal-fired power plants require significant maintenance to remain operational. The utility has included provisions for capital expenditure in its application to address these needs, but critics argue that simply increasing tariffs will not resolve the underlying issues with plant performance .
4. Debt Servicing:
Eskom’s massive debt burden has long been a source of concern. In addition to operational costs, the utility is seeking to recover part of the incorrectly deducted equity support from prior years. This recovery is aimed at stabilising its finances and addressing some of the historical financial imbalances .
Public Concerns and Opposition:
The proposed tariff increases have sparked widespread opposition, with many arguing that South African consumers should not bear the brunt of Eskom’s inefficiencies. Consumer groups and business organisations have expressed concerns about the potential economic impact of these hikes, particularly in light of South Africa’s ongoing economic challenges.
In January 2023, Nersa approved an 18.65% tariff increase for Eskom, followed by a 12.74% increase for the 2024 financial year. While these previous increases were implemented to address immediate financial needs, critics argue that further hikes may prove unsustainable for households and businesses .
Impact on South African Households and Businesses:
Rising electricity costs are expected to have far-reaching consequences. For households, increased tariffs could lead to higher living expenses, while businesses—especially energy-intensive industries—may face additional operational challenges. The agricultural sector, which relies heavily on electricity for irrigation and cold storage, is particularly vulnerable to price hikes.
For South Africa’s economy, the combination of high tariffs and load shedding could hinder economic recovery efforts. Many businesses are already struggling to cope with intermittent power cuts, and the prospect of higher electricity prices may force some to shut down operations or cut jobs
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