By Lehlohonolo Lehana.
South African households and businesses may have to contend with higher electricity prices if the National Energy Regulator of SA (Nersa) agrees to Eskom’s application for a 32% tariff hike.
Nersa has until tomorrow to decide on the power utility’s application for a 32% hike in electricity tariffs for the 2023/2024 financial year, followed by an increase of almost 10% in 2024/2025.
Eskom’s submission, given to Nersa in September, applied for a 32% tariff hike in 2023, which, when added to court-ordered backlogs, could see electricity prices climb by over 38%.
The power utility is looking to recover R351 billion through the tariff hike for 2023/24 and wants to recover R381 billion in 2024/25, Nersa said.
Nersa was expected to announce its decision to approve or dismiss the application at the end of November but instead postponed the matter to 14 December so it could deal with ‘numbers that were not adding up’.
However, the subcommittee decided that more time was needed to process the numbers and pushed the decision to 12 January 2023.
According to Nersa, the delay was due to “a lot of guidance” needed in making the decision.
“Certain numbers didn’t tally, and the regulator was asked to expand the work. The work still needs to be done. There are vast areas that need improvement,” it said in December.
The regulator was initially given a deadline of 23 December 2022 to make the decision but was granted an extension.
In a special electricity subcommittee (ELS) meeting held on Monday, Nersa noted that Eskom has applied for R351 billion in 2023/2024, including RCAs – and for 2024/2025, it wants R381 billion.
The delay has impacted Eskom’s financial outlook for the year ahead. Reporting its financial results last month, the group indicated that it was on track for a massive R20.1 billion loss in 2023 – not taking into account a hike in tariffs.
For the 2021/22 financial year, the group managed to reduce its loss from R25 billion the year before to R12.3 billion. The reduction in the loss was attributed to higher sales revenue driven by a 15% tariff increase.
With Eskom asking for an increase of more than double that for 2023, it should be able to reduce its losses even more.
The group will also be looking for room to spend more on diesel in 2023 after it blew past its budgeted R7 billion allowance last year, trying to keep the lights on.
It more than doubled its spending on diesel in the financial year, blowing R14.7 billion on fuel, up from R7 billion the year before. This resulted in a severe shortfall of diesel supply at the end of the year that prompted an emergency lifeline of 50 million litres from PetroSA, which has to last until March 2023.
Eskom has become reliant on its open-cycle gas turbines to ease the burden of load shedding in the country and is seeking as much as R20 billion to procure more fuel – a wish that is unlikely to be granted.
Nersa said that using OCGTs as an intervention is being relied on too frequently by Eskom, but it was cognisant of the fact that this is the lesser of two evils – and that the economic impact of losing the support of the turbines could be worse than raising the cap on what Eskom can spend to keep them going.
This will be factored into its final decision – however, the subcommittee made it clear that overreliance on the OCGTs isn’t how the grid should be run and that they should only be used during peak.
The implications of another sharp rise in power prices could be dire for South Africans already contending with a steep rise in living costs.