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'Unfair, unaffordable, unjust'tariff hike...

14 Jan 2023

'Unfair, unaffordable, unjust': reactions to electricity tariff hike stream in

  • Various organisations are up in arms over large electricity tariff increases granted to Eskom over the next two years.
  • Many have emphasised that the hikes do not address the root causes of issues at the utility.
  • Eskom said that the hike will contribute positively to its finances.

Ranging from disappointment to pure outrage, a litany of reactions have been put forward in response to the National Energy Regulator of South Africa’s (Nersa) decision to grant Eskom tariff increases of 18.65% and 12.74% over the next two years respectively.

Eskom said the decision will "positively contribute" to the utility’s financial sustainability, although it also recognised the pressure that it will place on consumers.

The Energy Intensive Users Group South Africa (EIUG), whose members account for over 40% of electricity consumption in South Africa, expressed concern that SA’s electricity prices are increasingly out of line with competitor countries, and that high annual increases, such as these, will leave local industries uncompetitive.

While "disappointed" with Nersa’s decisions, the group acknowledged it was a difficult decision to make.

"Nersa did not have much room to move considering Eskom’s challenging financial and operational position. To this extent the EIUG hopes, for certainty and price stability, that the decision is legally compliant and final and will stand," the organisation said.

Electricity costs surging above inflation

The Minerals Council South Africa, whose members consume about 30% of Eskom’s output, say that the tariff increases which have been announced will increase the mining industries electricity costs by R13.5 billion by the end of 2024.

"Since 2008, the price of electricity for the mining industry has increased eightfold while consumer prices, as measured using the consumer price index (CPI), have only doubled," the Council said.

The tariff hikes, "fundamentally shift the intermediary cost structures in mining" said the Council’s chief economist, Henk Langenhoven.

The Consumer Goods Council of South Africa (CGCSA) too said the tariff increases, though aimed at improving Eskom’s financial situation, will add more operational costs to companies in the consumer goods sector which are already battling with the financial impact of load shedding.

"CGCSA is calling for more operational stability and efficiency at Eskom by ensuring that it accelerates plans to restore generation capacity and improve availability of electricity. The tariff increases should be accompanied by a demonstrated commitment to deal effectively with the problems facing Eskom," the Council said.

'Addicted' to increases

Mayor of Cape Town Geordin Hill-Lewis, called the massively above inflation price hike of 18.6% "unfair, unaffordable, and unjust".

Eskom has alternative ways to raise funds, by reducing their payroll, cutting suppliers who are over-charging, especially for sub-standard coal, and by ending corruption, including recovering state capture loot, Hill-Lewis said.

A statement released by labour federation Cosatu echoed these sentiments, arguing that the tariff increases are not a viable solution to problems at the utility.

"The power utility has become addicted to them, and it has so far failed to come out with any tangible funding model for itself," the confederation said in a statement. "These increases only serve to pickpocket workers of their meagre wages, suffocate businesses and deny the economy the chance to reduce unemployment."

Gerhard Papenfus, CEO of the National Employers' Association of South Africa, added: "We refuse to accept that an increase is the solution to Eskom’s problems, as additional income will still flow to corrupt individuals and incompetent municipalities who refuse to settle their bills with Eskom."

Outstanding debt, owed by municipalities and other consumers to Eskom, currently stands at R55 billion and is growing.

A luxury item

The Organisation Undoing Tax Abuse (OUTA) said Eskom remains in severe trouble, and noted its "outrage" at government’s failure to help South Africans to weather this storm.

"Customers can’t afford current prices, which begins to move electricity closer to the realm of a luxury item," said OUTA’s parliamentary and energy advisor Liz McDaid.

The rate hike decision, McDaid said, comes against a background of months of severe load shedding, economic stagnation, high unemployment, massive customer debt to Eskom and government’s failure to provide solutions to municipal debt. Treasury’s solution to the Eskom R400 billion debt problem is also still awaited, she said.

The South African Federation of Trade Unions (Saftu) said that the increased price of electricity would "devastate the budgets of poor and working people" and could mean that some people may supplement their electricity supply with firewood, coal, paraffin and gas stoves and heaters - cheaper alternatives in the short term, but which would "create indoor air pollution, which is much costlier to health in the medium-term".

Western Cape premier Alan Winde said that the Western Cape’s Energy Council was committed to looking at all options to increase alternative power generation in the province. "To further our economic recovery, protect small businesses, and help individual citizens … We need to become independent of Eskom and be energy resilient," he said.

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