South Africans Say No To Eskom’s 66% Tariff Hike
Eskom’s proposed 66% tariff hike over the next three years has sparked widespread outrage across South Africa. The National Energy Regulator of South Africa (Nersa) held public hearings in Gauteng, the Western Cape, Limpopo, the Free State, and KwaZulu-Natal, and the message was clear: consumers, businesses, and civil society rejected the tariff hike as unreasonable, unaffordable, and detrimental to the nation.
The Unprecedented Tariff Hike Proposal
Eskom’s Multi-Year Price Determination (MYPD6) application outlines a staggering revenue increase:
- 36.15% increase on April 1, 2025
- 11.91% increase on April 1, 2026
- 9.1% increase on April 1, 2027
The state-owned utility claims the increase is driven by rising costs of primary energy, operational expenses, independent power producers (IPPs), and asset depreciation. However, critics, led by the Organisation Undoing Tax Abuse (OUTA), argue that Eskom’s inefficiencies should not be passed onto consumers.
OUTA’s Opposition: Key Arguments
OUTA presented a compelling case to Nersa, highlighting Eskom’s failure to implement meaningful cost-saving measures and its over-reliance on price hikes. Key points include:
1. Insufficient Cost Reductions
OUTA criticized Eskom’s inability to cut costs in crucial areas like staffing, operations, maintenance, and primary energy. Eskom’s failure to streamline its expenses, despite repeated price hikes over the past 15 years, was a focal point of OUTA’s critique.
2. Overdependence on Coal
Eskom’s continued reliance on coal, despite environmental and financial challenges, was flagged as unsustainable. OUTA urged the utility to develop a more robust transition plan toward cleaner, cost-effective energy sources.
3. Inefficient Diesel Usage
OUTA acknowledged Eskom’s efforts to reduce diesel costs but highlighted the inefficiency of Open-Cycle Gas Turbines (OCGTs). The organization recommended exploring alternative energy solutions such as gas conversion and energy storage systems.
4. High Staffing Costs
Eskom’s staffing costs were flagged as excessive, prompting OUTA to call for an independent review of remuneration and hiring policies. Downsizing and rightsizing the workforce were suggested as potential cost-saving measures.
5. Inadequate Loss Management
Losses from electricity theft, non-payment, vandalism, and procurement irregularities remain a significant drain on Eskom’s finances. OUTA recommended a more comprehensive approach to loss reduction, including setting concrete targets.
6. High Debt Burden
Eskom’s R450 billion debt is a major financial strain. OUTA proposed stricter adherence to National Treasury’s conditions for bailouts, the sale of non-core assets, debt-equity swaps, and listing certain entities to reduce debt.
7. Questionable Asset Valuation
OUTA also challenged Eskom’s asset valuation methodology, claiming it inflates the regulatory asset base, which in turn drives up electricity prices. The organization highlighted concerns with the valuation of Medupi and Kusile power stations.
The Public’s Outcry: A Collective Stand Against the Hike
Public sentiment during the Nersa hearings was overwhelmingly negative. Stakeholders from various sectors, including small businesses, municipalities, and agriculture, expressed concerns that the proposed increases would exacerbate poverty, hinder economic growth, and strain service delivery. Protests from political parties and civil society groups further underscored the broad rejection of Eskom’s application.
OUTA’s Recommendations
OUTA strongly urged Nersa to reject Eskom’s 66% tariff hike proposal. Instead, the organization advocated for:
- Prioritizing performance improvements and operational efficiency over price hikes.
- Developing a more sustainable energy strategy focused on renewable sources.
- Implementing stricter financial discipline to reduce reliance on government bailouts.
A Call for Responsible Governance
The proposed tariff hikes by Eskom are widely seen as an unreasonable solution to the utility’s financial woes. South Africans have made their voices heard, demanding that Eskom focus on efficiency and cost-cutting rather than burdening consumers with further increases. As Nersa deliberates on the application, the outcome will be a critical indicator of whether consumer concerns will be prioritized over corporate inefficiencies.
Related article: Proposed 36% Eskom Tariff Hike for 2025 Sparks Concerns for Municipalities: City Power Calls for National Dialogue
