News article

Nersa approves electricity tariff increase – relief for low-income households

The National Energy Regulator of South Africa (Nersa) has given approval for an increase in electricity tariffs by Eskom at its latest meeting. Eskom earlier indicated its intention to increase those tariffs by 18.65% for urban customers and key industries, plus an increase to 7,37c/kWh to accommodate for the subsidy. All taking effect on 1 April 2023, this will mean an unprecedented electricity tariff increase of up to 29,53% in total for a large number of households.

Low-income households, such as township residents and people living in rural areas, will face ‘only’ a 10% price increase. Eskom’s price increase is being defended by stating higher fuel costs, higher procurement from independent power producers (IPPs) and depreciation of its power generation assets. What are the consequences of the upcoming price hike on electricity?

Higher prices for large-scale consumers and suburbs
As it stands, mainly households located in suburban areas and big users of electricity will face the tariff increase by Eskom. Residents from townships such as Soweto and Thembisa will ‘benefit’ from a lower tariff increase. However, municipalities will still be subject to the 18,65% price increase on electricity purchases, which will in turn be passed on to residents. As low-income households will be relieved from the increased tariff; they face a limited price increase of up to 10 per cent. Nonetheless, it still counts as a hefty price increase.

On top of the 18,65% price increase by Eskom, customers must also factor in higher prices per kWh of electricity used, making the net price increase even higher in reality. Bearing that in mind, there seems to be no brake on ever-rising energy prices.

“Increasing independence from the energy grid”
While load shedding has been causing problems in South Africa for some time, now a hefty price increase is added to that. Further independence from the power grid would therefore be a sustainable step forward. In particular, companies that are highly dependent on the energy grid would do well to consider the next step towards a sustainable, decentralized future. More self-generation through solar panels for instance, and less purchasing from the energy grid.

Cape Town to invest in a reliable power grid
In the meantime, Cape Town aims to make itself less dependent on Eskom. Mayor Geordin Hill-Lewis recently stated he wants to end load-shedding in conjunction with a reduced dependence on Eskom, as a move towards a reliable energy grid and a less expensive supply of energy to consumers. Currently, 70% of the town’s income goes towards bulk purchase of electricity from Eskom, while 30% is invested in a reliable grid, healthy infrastructure and load-shedding solutions. While investing in this manner, it aims to curb Eskom’s monopoly on the electricity grid.