Tag: price hike

Source: Supermarket & Retailer

In a discussion document this week, the group said it would continue to use the historic method of tariff setting, but due to time pressure, there will be no public hearings on the matter.

The proposal comes after Nersa approved a 9.6% tariff increase for Eskom customers which took effect from 1 April 2022. This is separate from the proposed July increase which will apply to municipal customers.

The national energy regulator’s chairperson Nhlanhla Gumede said Eskom’s increase constitutes a 3.49% increase for the 2022/23 year, alongside legacy costs from previous years.

Gumede said this increase was decided on to balance the interests of the economy, consumers, and the utility. The price hikes take the average electricity tariff in South Africa from just over R1.33 per kWh to around R1.46.

Eskom had pushed for a 20.5% tariff increase for the 2023 financial year, warning that the hike is necessary for the continuation of its operations.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.

Not transparent

The opposition Democratic Alliance has criticised Nersa’s decision not to have public hearings on the matter, which it says undermines the concept of procedural fairness.

The party’s shadow minister of mineral resources and energy Kevin Mileham said consumers are already struggling to keep the lights on at current electricity prices cost levels.

“Due to the limited ability of municipalities to absorb costs and cushion consumers against electricity tariff increases, the costs will be passed on to the consumer. It is simply unacceptable for tariffs hikes to be imposed on consumers without any public hearings. A cloak-and-dagger operation, carried out without the input of those who would be most affected, is simply not right,” he said.

“Consumers should not be punished for Nersa’s inability to get its house in order on the electricity price methodology. The DA will fight against any attempt to impose an above-inflationary electricity increase on consumers without public participation.”

Union federation Cosatu warned that businesses and households are facing a crisis over rising electricity prices, and face further pain from coming fuel price hikes.

The union said that the 15% increase in electricity from Eskom would push people to “alternatives”, some of which could be dangerous. Meanwhile, businesses – already struggling with rising costs across the board – would struggle to survive the hikes.

“Any tariff increase will squeeze the small economy, businesses will go out of business, workers will be retrenched. People will revert to some unhealthy resources using woods, paraffin,” it said. “We may see an increase of fires in the squatter camps, so it’s a very sad story indeed.”

 

Price hike double-blow to hit South Africa

Source: Supermarket & Retailer

South African motorists can expect another record-high petrol price hike in April, with suppliers and manufacturers also likely to pass on additional costs to consumers as they cannot absorb these rapid fuel increases, say economists at the Bureau for Economic Research (BER).

The combination of the rising oil price on fuel and food costs will lead to rapidly increasing inflation, the group said in a research note on Monday (7 March).

The BER now forecasts that headline Consumer Price Inflation (CPI) will average 5.5% in 2022 – up from its initial 5% forecast in January. Given the further oil price surge in recent days, this updated forecast is already outdated, with further upward revisions required if oil stays at these levels, it said.

“This is especially the case as a growing list of local companies are commenting that they can no longer absorb a sustained rise in input costs and will now start to pass these on to the end consumer.

“These second-round price effects risk compounding the direct impact that the higher fuel price will have on driving measured South Africa inflation higher.”

It added that the additional upward pressure on inflation will squeeze household purchasing power across the globe, especially in the Euro Zone and the UK where gas forms an important part of the energy mix.

“Therefore, by exacerbating global price pressures, the Russia-Ukraine war will weigh heavily on the near-term world and domestic growth,” it said.

Because of the likely adverse domestic growth impacts of higher fuel and food prices, as well as the downside global growth risks, the BER said that it expects the South African Reserve Bank (SARB) will increase the policy interest rate by another 75bps in 2022.

“The next 25bps hike is pencilled in for the end of March. However, given rising risks of secondary price effects emerging and in order to anchor inflation expectations, the risk is that the SARB sees the need for a more aggressive, front-loaded hike in March. Still, such a move will risk compounding the impending hit to real GDP growth.”

Nersa grants Eskom 9.61% increase

By Crispin Adriaanse for IOL

Despite the National Energy Regulator of SA (Nersa) awarding Eskom less than half of the increase in electricity tariffs it originally applied for, Cape Town Mayor Geordin Hill-Lewis believes it is still too high for Capetonians to afford.

On Thursday, Eskom said it noted the revenue determination on the increase of electricity prices at 9.61% handed down by Nersa.

“The financial implications on this decision on Eskom’s long-term sustainability will need to be further understood. It is understood Nersa considered the impact on consumers and the financial sustainability of Eskom as it made its decision,” Calib Cassim, Eskom’s chief financial officer, said in a statement.

The new increase to electricity prices is effective from April 1.

The state-owned public utility originally proposed a 20.5% increase in December last year for the 2023 financial year, Cassim confirmed at the time.

Eskom proposed a 20.5% increase in order to address financial sustainability and liquidity challenges.

If the 20.5% increase was realised, R100 of electricity would have translated to only 30 units.

However, Mayor Hill-Lewis vehemently stated on multiple occasions that the proposed increase was far too much for Capetonians to afford.

The City of Cape Town set up a petition following his remarks to challenge the proposed hike – which is closed at this time.

Hill-Lewis proposed at the time the justifiable increase in electricity tariffs would be in line with inflation.

On Thursday, despite the 9.61% increase instead of the 20.5% increase, Hill-Lewis believes it is still too high.

“This increase is less than half of what Eskom asked for, and is a clear rebuke to Eskom’s totally unrealistic request,” he said.

“While I am happy that Nersa took the voice of thousands of Capetonians into consideration, it must be noted that the increase of 9.61% is still 4.1 percentage points higher than inflation.”

“The latest announcement by Nersa will not be welcomed by Eskom. However, passing the bill on to struggling consumers should not be the default solution, and Nersa should be lauded for taking a strong stance in this regard,” he added.

A 544% increase to the average price of electricity was felt by South Africans pockets between 2007 and 2021, yet an increase in load shedding was still experienced – the worst load shedding occurred at the height of the Covid-19 pandemic in 2020 and 2021.

“Electricity tariff increases for City customers will be determined through the Budget process and increases will come into effect from 1 July 2022,” the mayor said.

 

By Carol Paton for Fin24

Eskom defended its proposed 20.5% tariff increase for 2022/23 on Monday, arguing that most of the cost increase was driven by two factors outside of its control: the requirement to increase purchases of energy from independent power producers and the increase in carbon taxes.

Together, these two factors accounted for 13.8% of the proposed price increase, while increases in operating expenditure accounted for only 7.5% and cost escalations in primary energy for 6.5%. SA introduced a carbon tax in 2019, which is to be increased gradually. IPP costs for Eskom are set to rise as more producers come on stream.

Due to large increases in these and other areas, in its application Eskom requested a negative return on assets of 6.38%, to prevent the overall increase rising too high.

CFO Calib Cassim presented Eskom’s revenue application to the National Energy Regulator of SA (Nersa) on which the utility’s annual tariff increase is based. Nersa decides the tariff on a legislated methodology, which determines how much Eskom can justifiably earn from consumers, assuming Eskom operates efficiently.

The regulator has seldom granted Eskom its full request, as its scrutiny of Eskom costs has almost always found that a large a portion of costs be ruled out due to inefficiency. Eskom, has in turn, regularly succeeded in clawing back some of the costs retrospectively through a mechanism called the regulatory clearing account. Retrospectively allowed costs are then added to future tariffs, making for a complicated and constantly changing price determination mechanism.

While the determination of Eskom tariffs is extraordinarily complicated at the best of times, this year’s application – which will put in place new tariffs on 1 April for non-municipal customers and 1 July for municipal customers – is even more complicated. This is because the application was drawn up a year ago but had not been deliberated on by Nersa.

In September, well after the application had been completed, Nersa informed Eskom that it intended to change the methodology for determining allowable revenue, requiring a new application. In December, Eskom approached a court and secured an order that Nersa consider the 2022/23 application immediately to put new tariffs in place by 1 April.

On Monday, Cassim presented Eskom’s tariff application which was compiled a year ago. However, much has changed in both Eskom and wider energy supply industry over the past year and Cassim will be given another opportunity on Tuesday to revisit the assumptions in the application.

While the balance between the various factors contributing to the price application will change, the global amount of 20.5% is expected to remain the same.

‘Not affordable’

But while Eskom tried to justify its application, stakeholders and interested parties at the Nersa public hearings appealed to Nersa to ignore its methodology and refuse to award the increase on the basis that consumers could not afford them.

Among them was mayor of the City of Cape Town Geordin Hill-Lewis who said the proposal was “unaffordable, unfair and unjust”.

“The point of departure should not be what Eskom’s maximum return on assets should be, but what people can afford. It would in line with inflation at around 5.5%,” he said.

The Nersa methodology should be set aside on the grounds that it is not rational to award high tariff increases in the prevailing economic environment, he said.

Other groups, including community, faith-based organisations and business organisations made similar appeals arguing that it was immoral to force consumers to pay for Eskom’s and government’s mistakes and excesses of the past.

Members of the Nersa electricity panel told presenters that while they sympathised with their plight, their hands were tied by legislation methodology.

 

Electricity price hike looms

Source: Supermarket & Retailer

The National Energy Regulator of South Africa (Nersa) has invited stakeholders to comment until Friday (14 January) on Eskom’s proposed tariff increases for the country.

Eskom chief financial officer Calib Cassim has confirmed that the state-owned power utility has applied for an electricity price increase of 20.5% for its 2023 financial year, set to take effect from 1 April 2022.

However, analysts have raised concerns as to what increases will actually be pushed through, with Nersa’s tables showing hikes of as much as 40% depending on how outstanding debts are clawed back.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.

Presenting Eskom’s interim results on 15 December, chief executive Andre de Ruyter warned that the seasonality of Eskom’s performance means that there is considerable cost pressure in the second half of the financial year, driven largely by summer maintenance requirements and costs associated with ensuring the security of supply.

He said that while the phased easing of Covid-19 lockdown restrictions has led to an improvement in financial performance during the first six months of the year, ongoing risks for Eskom’s sales and revenue include supply constraints, load shedding and load curtailment, as well as a constrained economy.

The chief executive said that to achieve independent financial sustainability, remain a going concern and meet debt service requirements on a standalone basis, the price of electricity in South Africa must migrate towards a cost-reflective tariff.

“We have to emphasise that the power system is unreliable and unpredictable due to insufficient maintenance of generation plant over many years. Maintenance outages take around 24 months to plan, and take from three to six months to execute.

“The response to the pandemic prevented us from doing as much maintenance as we would have liked, while prevailing liquidity challenges continue to constrain funds available for maintenance,” he said.

“To date, we have released funding of R8.3 billion for outages during the 2022 financial year, and R8.2 billion for those in 2023, against a requirement of R10.7 billion next year.”

Record fuel hike hits SA

By Jason Woosey for IOL

South African motorists and commuters are facing tough times ahead with record increases for both petrol and diesel set to kick in from Wednesday, 03 November.

According to the Automobile Association, petrol is set to rise by R1.21 per litre, while diesel will go up by a staggering R1.48 a litre and illuminating paraffin by R1.45.

This will inflate the price of a litre of 95 Unleaded petrol to R18.82 at the coast and R19.54 in the inland regions, where the slightly cheaper 93 Unleaded grade will now retail for R19.32. The wholesale price of 50ppm diesel will now amount to R16.63 at the coast and R17.23 inland, but keep in mind that the retail prices, which are unregulated and therefore vary from station to station, will be somewhat higher than that.

But how much more will South Africans pay per tank?

Putting 35 litres of 95 Unleaded into a compact hatchback with a 40 litre tank, such as a Volkswagen Polo or Hyundai i20, will cost an additional R42.35 at the coast (or R658.70 in total), while filling up with 93 Unleaded in Gauteng will now cost R676.20.

Putting 50 litres into a medium-sized car with a 55 litre tank, such as a Toyota Rav4 or Corolla Quest, will cost an additional R60.50, bringing the price of a tank to R941 for 95 ULP at the coast and R966 for 93 ULP inland.

A 75 litre diesel refuel in a bakkie such as a Toyota Hilux or Ford Ranger, or a large SUV like the Fortuner, will cost an additional R111, with the retail tank price differing, depending on where you fill up. Do shop around!

Why is fuel going up?

According to the AA, a “perfect storm” of demand imbalances is behind the record increases, including rand weakness, international oil prices and refinery costs. It also doesn’t help that fuel taxes currently account for at least R6.11 for every litre of fuel.

The cumulative effect of these increases is even more disastrous than the latest increases suggest. Consider that petrol is now around 40% more expensive than it was at the beginning of this year. With Brent Crude oil prices currently sitting at $84.71 per barrel and the rand trading at R15.37, there is little chance of any fuel price relief in the near future.

“The fuel price has a direct bearing on an already weak economy as it continues to drive up inflation on

essential consumer goods and affects every South African,” the AA said. “As we have said many times in the past, all the elements that comprise the fuel must be fully interrogated to determine if they are necessary. Given that the fuel prices are now at record highs, such a review is overdue”.

Petrol approaches R18 per litre

By Jason Woosey for IOL

South African motorists, who are already reeling from record fuel prices, will have to fork out even more from Wednesday, August 4, as the Department of Energy has announced steep price increases for both petrol and diesel.

Both grades of petrol are set to increase by 91 cents a litre, while the wholesale price of diesel will rise by 55 cents. This means that from Wednesday, South Africans will pay R17.58 for a litre of 95 Unleaded petrol at the coast and a whopping R18.30 in the inland regions, where the cheaper 93 Unleaded petrol will now retail for R18.11. The price of 50ppm diesel will rise to R15.06 at the coast and R15.66 inland, but keep in mind that these are wholesale prices and the (somewhat higher) retail prices for diesel will vary between fuel stations.

How much more for a tank?

What do these price increases mean in terms of the cost of a tank? Putting 35 litres of 93 Unleaded petrol into the 40 litre tank of a Volkswagen Polo (assuming you’re sensible enough to never arrive with less than five litres on board) will now cost you R634, or R31.85 more than it currently costs. Putting 50 litres into a mid-sized car like a Toyota Corolla will now cost R905.50, which is R45.50 more. 75 litres of diesel in a large SUV like the Toyota Fortuner, or a Hilux bakkie, will cost an extra R41.25 versus last month.

According to the Automobile Association, the price of petrol in August will be around 23 percent higher than in January, while diesel would have risen by around 20%.

“The average Rand/US dollar exchange rate consistently trended upward during July and the weaker local currency will make it more expensive for South Africa to import fuel,” the AA said, also noting that international oil prices averaged at a higher level last month. Fuel taxes and levies such as the Road Accident Fund levy, which increase annually, are not helping the situation, accounting for R6.11 per litre of fuel.

 

Petrol price set to increase on Wednesday

Source: eNCA

Motorists can expect an increase in petrol prices on Wednesday.

The Department of Energy says Petrol is set to increase by 29 cents a litre of 93 unleaded petrol.

And leaded petrol will increase by 26 cents a litre.

Diesel will see an increase of 42 cents and illuminating paraffin by 36 cents.

Petrol and diesel prices are largely determined by the oil price, as well as rand strength, given that South Africa must buy oil in the US dollar.

Pain at the pumps for some

Source: The South African

The mid-month petrol price estimates for July were published on Tuesday, and they are the very definition of a mixed bag. Although some grades of fuel are seeing costs drop steadily, others are heading in the wrong direction.

Petrol prices are set for a decrease. Granted, that will only be by a few cents – as it was last month – but any movement in the right direction should be welcomed. According to the Central Energy Fund (CEF), six cents per-litre will be trimmed from the 95 grade of petrol, and 93 grade is getting three cents cheaper. Every little helps, right?

– Petrol 95 is expected to cost an average of R17.07p/l inland, and R16.41p/l by the coast.
– Petrol 93 is expected to cost an average of 16.88p/l inland, and R16.36p/l by the coast.

Both diesel and illuminating paraffin are likely to be more expensive in July, though. In total, costs for the fuel are predicted to rise by 19 cents. Meanwhile, there is a 14 cent increase on the cards for the aforementioned oil:

– Diesel (wholesale) is expected to cost an average of R14.85 – R14.90p/l inland, and R14.24p/l by the coast
– Illuminating paraffin (wholesale) is expected to cost an average of R8.91 across the country.

Things could have been much better for South Africa: After posting some very positive GDP data and seeing the Rand perform strongly against the US Dollar, there was a quiet confidence in some circles that the petrol price would take a significant tumble in July. But a mix of load shedding and COVID-19 infections effectively put paid to that.

Rolling blackouts have crippled a pandemic-weary country for the best part of two weeks, inhibiting businesses from performing at their peak at a time where every cent counts. According to the CEF, this has taken a substantial toll on the forecast fuel costs for the month ahead – and it’s another thing fine mess we can pin on Eskom.

 

Pain at the pumps after record increase

By Shamiela Fisher for EWN

The price of petrol goes up by a rand at midnight while diesel increases by between 63 and 65 cents a litre.

This record increase in the price of fuel will see them pay about R17 for a litre of petrol.

The mineral resources and energy ministry said it was due to crude oil prices, global petroleum product prices, the Rand/US Dollar exchange rate, as well as Fuel and Road Accident Fund Levies.

Eyewitness News spoke to a few motorists about the hikes.

“I’m definitely unhappy with the petrol hike. It’s obviously going to affect us in our homes,” said one motorist.

Another added that: “It’s affecting my pocket negatively as I need to travel to work.”

“This is one of my biggest expenses every month, so this would really negatively affect my financial situation,” said another motorist.

Meanwhile, trade union UASA said it was deeply concerned by the continuous fuel price increases.

In a statement on Tuesday, the union said: “[These increases leave the] workers in financial distress as they have to chip in more for their basic needs. The increase will be passed on to the consumer who will be forced to pay more for their basic needs.”

 

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