NERSA, the National Energy Regulator of South Africa has approved an effective 14% increase in electricity tariffs starting from 1 April 2019. No this is not an April fool’s joke, although the public probably feel that they are being treated like fools. The tariff increase is made up of a 9.41% increase for the 2019/20 financial year (it’s Multi Year Pricing Determination application) and a 4.41% increase approved earlier this year to partially compensate ESKOM for it’s revenue shortfall for 2017/18. This was based on ESKOM’s (RCA) application for revenue cost recovery. The RCA process is a legal process whereby ESKOM may apply for compensation for cost recovery when its approved revenue allowance from NERSA did not match its income.
First, we hear about rampant mismanagement and corruption and out of control debt that ESKOM can’t reasonably service. A 14% tariff hike following above inflation escalation of ESKOM tariffs since 2007 is not reasonable. Then we have load shedding, the result of the domino effect of mismanagement. The calculations underpinning tariffs are based on projected electricity sales, but with load shedding we are now getting less for more.
Added to our woes is the news of fundamental technical problems with Medupi and Kusile coal power plants. Which are already controversial for being amongst the biggest new coal plants in the world at a time when renewable electricity is proving cheaper.
A tragic trajectory that will have very significant consequences for many of us as more big customers ditch ESKOM for independent alternatives. What happens to the those who can’t afford Renewable Electricity infrastructure? How to stop these homes and businesses from becoming stranded consumers confronted with the double negative of unaffordable ESKOM increases, and now also reduced cross- subsidy options that traditionally came from higher income consumers.
I attended the NERSA public hearings in January in Cape Town where ESKOM CEO Phakamani Hadebe apologised for the problems at ESKOM by saying we have messed- up but we have plans to turn around. Now, he said, the public just needs to go through the pain because of the past. I imagine that National Treasury is also experiencing Phakamani acknowledged pain from the serial bail-outs of so many mismanaged SOEs. So, with NERSA between the rocky boat of ESKOM and the hard -to -find- money -place of Treasury, the public are once again required to provide the bail out.
Local authorities will feel the brunt of the increases as their new tariffs only become effective from 1 July. This means that municipalities will be paying 14% more to ESKOM than they are receiving from their customer base for three months from 1 April to 1 July. The jaded cry that local authorities can fund this shortfall from their profit on the sale of electricity is seriously past tense. The `profit’ which was designed to earn revenue on the difference between what the City pays ESKOM for Megawatts and what it charges its customers per Kilowatt is disappearing with each of ESKOM’s above CPI increases. This rapidly diminishing source of revenue was designed to pay for services such as libraries, parks, metro police etc. which are not fully recovered from property taxes (rates). Excessive electricity prices don’t just rob citizens of access to electricity, but also rob them of valuable community services.
A ray of hope is the City of Cape Town’s appeal to the Gauteng High Court for the right to buy electricity directly from Independent Power Producers. This application was brought before the court over a year ago. In February 2019, the City requested their legal team to lodge a renewed appeal that their application be treated as urgent. The City wants a Section 34 determination in accordance with the New Generation Capacity Regulations to allow it to procure up to 400MW of renewable energy from IPPs. No doubt many local authorities are waiting for a positive decision so that they too can apply to by-pass increasingly expensive and unreliable ESKOM electricity.
There are also many initiatives to make Small Scale Embedded Generation (SSEG) including Roof Top PV accessible to a wider range of consumers and communities. While it is taking time to sort out regulations, funding models and tariffs, the writing is on the wall in bright LED signage. The future is likely to be more locally based generation with municipalities partnering with commercial and community renewable generation projects.
More on SSEG to follow. In the meanwhile, whomever has not sorted their energy efficiency measures now is the time to get serious with LED lights, a pressure cooker or wonder bag, hot water bottles or bean bags and a solar hot water geyser. Solar water heating results in a direct saving of between 25 and 33% of your electricity bill.
KimK 08 March 2019