Business Unity South Africa (Busa) says the National Energy Regulator of South Africa (Nersa) is in the unenviable position of trying to balance Eskom’s applications with consumer submissions, and needs to review and amend its pricing policy to be fit for purpose for the future energy mix.
This follows after the High Court earlier this week ruled in favour of the State-owned power utility in its legal battle with Nersa, allowing Eskom to implement further electricity tariff hikes.
The court declared Nersa’s decision to deduct a R69-billion equity injection into Eskom from its allowable revenue for the period 2019/20 to 2021/22 as illegal.
In response, environmental organisation Greenpeace Africa climate and energy campaign manager Happy Khambule says that while Eskom may celebrate this decision of the court, at the end of the day, South Africans still lose.
In 2013, South Africans were paying 66c/kWh; now they must prepare to pay 128c/kWh.
“This is set to continue. The average price is not the price we pay for electricity. The real price is at least 10% to 15% more than the average, depending on where one lives. To do this to South Africans in such a financially volatile time is morally reprehensible.
“The court's verdict makes it clear that Eskom is too big and is looking to be regulated, [while] the regulator has been punched drunk by Eskom, and heavy industry as a result has forgotten its role in the electricity supply industry,” Khambule notes.
Greenpeace Africa believes there is a clear opportunity for renewable energy to fill the gaps at a local and household level, to provide the security of supply needed and lessen the impact of rising tariffs.
“The South African government must do everything in its power to make this the reality, rather than forcing South Africans to suffer in the middle of Nersa and Eskom's power struggle,” Khambule states.
Busa says that tariffs have risen exponentially over the last decade and impacted on the ability of companies to operate profitably.
In some cases, electricity costs are more than 50% of input costs, which is "untenable and unsustainable".
Busa CEO Cas Coovadia states that this is driving companies to seek alternative energy supply, move operations offshore or simply close.
“This is bad for the economy and also perpetuates the so-called utility death spiral for Eskom. In this light, it is true that the methodology is not fit for purpose and Busa has long recommended its revision.
“Increasing prices and pervasive price uncertainty owing both to outdated methodologies and court processes like this also erode investor confidence making South Africa unattractive,” he explains.
Busa hopes that the tariff determinations for the remaining years of Multi-Year Price Determination 4, including any outstanding regulatory clearing accounts and court remittances are dealt with efficiently, fairly and expeditiously to give some clarity on the price path for the coming years.
This is especially important in light of economic recovery efforts post-Covid-19. In parallel, Busa strongly advises policymakers and Nersa to review and amend pricing policy and the tariff determination methodology to ensure a framework that is fit for purpose considering a diverse and distributed energy mix in the future.