South African electricity consumers are set to face steep tariff increases after a multi-billion rand error by the National Energy Regulator of South Africa (Nersa) in its calculations for power utility Eskom.
The regulator reached an out-of-court settlement with Eskom that will allow the utility to recoup R54-billion. This amount is owed due to an error in calculating Eskom’s revenue for the current and next two financial years.
As a direct result, the approved price hike for April next year has been significantly raised. Consumers will now face an 8.7% increase, a sharp jump from the 5.3% hike that was initially announced.
The settlement has sparked serious concerns about the regulator’s competence and its role as a guardian of the public interest. Energy analyst Chris Yelland stated that this is not an isolated incident, revealing that a separate recent court order found Nersa had made further mistakes amounting to R40-billion in previous years that are also due to Eskom.
“This is one hell of a mistake, a 54 billion rand mistake. And I must tell you, this is not the first mistake that Nersa made,” Yelland said.
The total amount to be recovered from consumers through future electricity tariffs now amounts to a staggering R94-billion, combining the R54-billion from this settlement and the R40-billion from the prior error.
Yelland warned that constant electricity price hikes are severely damaging the economy and undermining the competitiveness of local businesses and industry. He pointed to major companies like ArcelorMittal and South 32, which have sought special pricing arrangements from the regulator, warning that without lower power costs they would be forced to close operations and lay off workers.
“Their message is essentially: if you don’t give us a price reduction, we’re going to close our business,” Yelland explained.
The Black Business Council has echoed these concerns, highlighting the immense strain higher prices will place on small businesses. CEO Kganki Matabane warned that without urgent intervention, the risk of illegal connections will rise.
“We need to find a quick solution because customers cannot be the ones who are bearing the bad news on their own,” Matabane said. He met with the Minister of Electricity last week to discuss the crisis, stating that increasing the input cost of goods and services will force some businesses to close as they can no longer absorb the cost of electricity.
In light of the costly mistake, there have been growing calls for urgent reform of the electricity sector and demands for accountability at the regulator.