Tag: tariffs

By Jamie McKane for MyBroadband

Eskom’s proposed electricity tariff changes could see the electricity bill of average South Africans skyrocket, according to energy expert Ted Blom.

Eskom itself has rebutted these projections, however, stating that while certain customers may pay more and others less, the change will not lead to an increase in its revenue.

The power utility plans to reduce the electricity tariff for the peak winter months and hike tariffs for electricity usage during its summer period.

It has also said it wants to replace the inclining block rate tariff system with a new system that charges fixed network costs regardless of usage and separate electricity usage costs.

The inclining block rate system currently means that South African households that use more electricity pay more per kWh than those which use a lower amount of electricity every month.

Removing this would mean that all households would pay the same per kWh of electricity usage, regardless of how much they use each month.

Potential for massive bill shock – Ted Blom
Eskom has said these proposed tariff changes are being implemented to bring the prices consumers pay for electricity in line with the efficient cost of producing power.

Blom, however, has warned that those who do not use much electricity every month may see a significant increase in their monthly electricity bill.

This is because while Eskom has said it will reduce winter tariffs, it only charges these tariffs for three months of the year. During the rest of the year, it charges summer season tariffs, which it has said it plans to hike.

Blom says that depending on how much these tariffs are altered, this may result in a net increase in consumer electricity bills per year.

Additionally, the introduction of a fixed network cost could see those who use relatively little electricity paying much more than they currently do, Blom said.

This is because they will be required to pay fixed monthly costs for being connected to the electricity grid, and this charge will be incurred no matter how much they try to save on electricity usage.

These changes will be most felt by households that use electricity sparingly, Blom said.

Speaking to eNCA, Blom said households that cannot afford to buy a lot of electricity will face a heavy burden if Eskom goes through with these changes.

“Eskom hasn’t provided the exact breakdown, but as an example – on the first 300kWh of electricity, where you used to pay R1.29 you could now pay closer to R2, and that will double the average person’s electricity bill,” he said.

Some customers might pay more or less – Eskom
Speaking to eNCA following Blom’s statements, Eskom electricity pricing specialist Shirley Salvodi said that the changes to the summer and winter tariffs would be revenue-neutral for Eskom.

“The sum of all the changes we are making equals the Nersa-approved revenue requirements,” Salvodi said. “So by slightly reducing the winter rates and increasing the rates for the nine months in the summer, the sum of the two changes is revenue-neutral for Eskom.”

“But some customers might pay more or less, depending on their profile.”

Regarding the inclining block rate tariff changes, Salvodi argued that the projection that some customers will pay double is not strictly correct.

“The statement made that some customers are going to pay double is a bit misleading,” she said. “There are many customers that are actually going to see benefits from the changes we are proposing.”

In response to questions from MyBroadband, Eskom spokesperson Sikonathi Mantshantsha elaborated on Salvodi’s previous statements.

“The proposed change to our tariffs structure, reducing the three winter months and increasing the nine summer months, is calculated in such a way that the same amount of revenue will be received by Eskom,” he said.

“Eskom will not be earning any additional revenue from this change, and all of the changes must be approved by regulator NERSA.”

Removing the inclining block tariffs and the reasons are clearly spelt out in the power utility’s submission, Mantshantsha said.

“I encourage customers and Mr Ted Blom to read the document, understand the numbers and use the models Eskom has provided on our website.”

Mantshantsha added that customers who do not use a lot of electricity will not be required to pay these fixed charges.

“A point to note is that Eskom is not proposing to introduce fixed charges for low consumption customers, so there is always this tariff option available for these customers,” he said.

Consumers lose again in Eskom-NERSA clash

Source: OUTA 

Eskom’s urgent application filed recently to recover one of the R23bn bailouts in 2021 is understandable but it is harsh news for struggling consumers and businesses.

There is no way to win in this situation.

It’s the latest move in the legal battles between the inept regulator, NERSA, and the utility struggling with unsustainable debt.

In July 2020, the high court ruled that NERSA was wrong to consider the R69bn government bailout to Eskom (R23bn a year for Eskom’s 2019/20, 2020/21 and 2021/22 financial years) as revenue instead of as an equity injection, and that this resulted in a significantly lower Eskom electricity price increase allowed for these years. The court ordered this to be added back to the electricity price.

We note that NERSA conceded and acknowledged that it erred in this regard in the court proceedings leading up to the judgment against it. We further note that the judge ordered the error be rectified through appropriate tariff increases during the 2021/22, 2022/23 and 2023/24 financial years.

NERSA was subsequently granted leave to appeal, not in respect of its self-acknowledged error, but to challenge the judge’s authority to prescribe the manner and timing of electricity price increases to rectify NERSA’s mistake. NERSA believes it should have the right to decide how much the prices should increase and over what period in refunding Eskom, taking into account the effect on customers and the economy. NERSA’s appeal – which is still pending – effectively suspended the court order.

Eskom’s interdict this week calls for R23bn – one year’s bailout – to be loaded onto the 2021 price (the allowable revenue), so that it does not lose another year of this. It will add about 10% to the price increase from April 2021, in addition to the 5.22% already granted. In terms of the court order, it will increase the price from the already approved 116.72c/kWh to 128.24c/kWh.

OUTA believes that NERSA has demonstrated a serious lack of competence and judgment in its misappropriation of R69bn as revenue instead of equity in making the Multi-Year Price Determination (MYPD) for the 2019/20, 2020/21 and 2021/22 financial years. While this has a negative impact of Eskom’s cash flow and sustainability, we also believe that the application of Eskom’s tariff increases following the court’s ruling in their favour will be a blow to an already over-burdened South African consumer and the economy as a whole.

The past decade of NERSA’s lack of leadership and political meddling has failed to hold Eskom’s past leadership to account for the utility’s soaring costs, borrowings and false asset revaluations. This is now playing out in very technical and costly court challenges that are having negative consequences on both Eskom and the public at large.

OUTA believes that NERSA may be wasting more time by opposing Eskom’s interdict to have one of the three R23bn bailouts loaded onto the 2021 price, as this may lead to more bailout requests from Eskom to prevent it defaulting on its loans.

Eskom effectively lost the R23bn a year for 2019/20 and 2020/21, due to NERSA’s ruling. OUTA believes this ship has sailed and that this situation provides NERSA and Eskom with an opportunity to reach a compromise on writing off at least part of the outstanding R46bn, in a way that takes into account the interests of Eskom, customers, taxpayers and the economy.

Are Eskom’s prices too low?

Source: Fin24

Eskom’s balance sheet has been providing a subsidy to consumers over many years, but this is not sustainable anymore and has reached a breaking point, the state-owned power utility said on Monday evening.

Eskom continues to share the rationale for its average annual electricity increase application of 15% for the fourth Multi-Year Price Determination (MYPD4) and Regulatory Clearing Account (RCA) balance application for 2018 made to the National Energy Regulator of South Africa (Nersa).

Nersa’s public hearings on the application continue and the latest one took place in Rustenburg for stakeholders in the North West.

“The main cause of the required price increase is the phasing-out of the current price subsidy, which does not preclude the subsidisation of specific targeted customer categories in future,” said Deon Joubert, Eskom’s corporate specialist for finance.

“Eskom is cognisant of the potential impact of the increase in various sectors, but it finds itself in a very difficult financial position… however, an objective analysis indicates that its debt situation is mainly or more than 80% a function of having had to take responsibility for the build programme, without the electricity price responding as was required.”

Eskom argued that, while higher tariffs are bound to dampen demand, a reluctance to raise prices towards cost-reflectiveness will deny Eskom the ability to fund investments and maintenance required to sustain an adequate security of supply.

“An inadequate security of supply has more negative repercussions to economic growth and social welfare than a tariff increase,” said Eskom.

Looking closely at unit costs, a World Bank analysis concluded that Eskom’s unit costs are very low relative to other sub-Saharan Africa utilities, Eskom said in a statement.

It found that Eskom’s unit cost was the 3rd lowest.

“Similarly, Eskom’s average price is very low relative to other sub-Saharan Africa utilities – but they are all pricing their electricity at unsustainably low levels and are thus in – or heading to – significant financial difficulties,” said Eskom.

The report calculated that 81% of the gap between Eskom’s current price and its costs is due to under-pricing, Eskom said.

In its presentation, Eskom looked at how its actual and projected electricity price from 2010 to 2024 compared to external references.

“On analysis, it became evident that similar to Nersa’s future price path, the various MYPD price paths Eskom requested would plateau once prices reached levels reflective of prudent and efficient costs – which Eskom calculated to be midway between Nersa’s previous upper- and lower price boundaries,” said Eskom.

Follow us on social media: 

               

View our magazine archives: 

                       


My Office News Ⓒ 2017 - Designed by A Collective


SUBSCRIBE TO OUR NEWSLETTER
Top