By Ashleigh Brown, journalist, Justmoney
Eskom has been given the green light to hike electricity tariffs by 12.69% by the National Energy Regulator of South Africa (Nersa) for 2015, which will only add to the already struggling economy and consumer woes.
As inflation is set to average at 6.2% next year, said the South African Reserve Bank (Sarb) last month, hiking electricity prices is more unwelcome news for consumers and business alike.
“The implementation of the second Multi-Year Price Determination (MYPD2) Regulatory Clearing Account (RCA) in 2015/16 will result in an average tariff increase of 12.69% for standard customer tariffs from the 8% approved in the MYPD3 decision of February 2013,” said Nersa in a statement.
According to Eskom, determining the price of electricity is based on future ''projections'' and ''assumptions'' of electricity usage.
Nersa has also granted Eskom a balance of R7, 818m: “The RCA balance will be a once-off recovery from the standard tariff customers as well as other Eskom customer categories and will only be implemented in the 2015/16 financial year,” said the regulator.
The RCA balance is a contributing factor to the extra 4% increase customers are set to pay by next year.
“Eskom is acutely aware of the impact of tariff increases on the economy, particularly poor households,” said Eskom in a presentation. Therefore, Eskom has assistance programmes for these households.
There are three main programmes at the moment: the electrification programme, which subsidies the cost of electricity in poor homes, mainly in rural areas; the free basic electricity programme, which gives 50 kilowatt hours to the poorest households, and the free energy efficient solar water rebates programme.
However, the programmes are not reaching as many people as was initially anticipated: “Between 1994 and 2013/14, just under 5.7 million households had been electrified under the programme, while in the period from 2002 to 2013/14, 68 115 households in the Eastern Cape, KwaZulu-Natal and Limpopo had been supplied with non-grid technology (solar panels and renewable energy),” said the Parliamentary Monitoring Group in a statement.
However, there were still 3.3 million households without electricity, with 75% of these in the Eskom supply area, and 25% in municipal supply areas.
The price hike comes as Eskom seeks revenue amounting to R1, 09 trillion for the five year period ending 2017/2018 and struggles to pay for the debt it has resulting from the building of new power plants.
However, debt is not the only concern Eskom has. The power company is also struggling to generate enough electricity as the demand is outstripping the supply.
This also comes about as Russian state nuclear vendor, Rosatom, will supply the South African government with eight new nuclear units to the capacity of 9600MW. However, this will reportedly only be ready by 2030.
“We have serious concerns about this agreement. Last year, an unsigned draft agreement sought to give Russia exclusive rights for the construction of nuclear plants in South Africa by committing government to securing consent from Russia should South Africa wish to enter into any other agreements with third-country organisations or countries,” said Lance Greyling, Democratic Alliance shadow minister of energy.
Government announced last month that Eskom would receive a financial rescue package, the details of which will be announced by Financial Minster Nene in his speech on October 22.
Justmoney reported on the 8% increase earlier this year, click here.
To find out ways that you can save on your electricity costs, click here.