SAFCEI calls for urgent overhaul of South Africa’s energy system as Eskom proposes massive tariff hike

As citizens prepare to make oral presentations at the upcoming hearings, the Southern African Faith Communities’ Environment Institute (SAFCEI) is calling for an urgent overhaul of South Africa's electricity pricing and tariff system. This follows Eskom’s proposal to raise electricity tariffs by 36.15% in its Multi-Year Price Determination (MYPD6) submission to the National Energy Regulator of South Africa (NERSA). In the face of the current economic hardship facing over a third of electricity customers, including government departments, local authorities, small and medium businesses and households, the multi-faith eco-justice organisation argues that such a massive electricity price increase is not rational.

According to SAFCEI’s Maia Nangle, “If approved, this increase would significantly worsen the energy affordability crisis, particularly for low-income communities. To ensure energy security and sustainability for all, especially for the most vulnerable in the country, we need a comprehensive review of South Africa’s electricity tariff model and electricity supply system. Electricity Minister Kgosientso Ramakgopa has already stated that the government will not accept a tariff increase above 20%, but even this proposed increase is unsustainable and unlikely to resolve Eskom’s ongoing financial difficulties or prevent further debt accumulation.”

According to SAFCEI, Eskom’s financial instability stems from deep-rooted systemic issues that urgently require coordinated intervention. Among these issues is the slow transition to renewable energy, particularly through South Africa's Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). SAFCEI argues that poor leadership and political interference have delayed progress in renewable generation, forcing Eskom to rely heavily on expensive open-cycle gas turbine (OCGT) plants to meet demand, escalating operational costs.

Nangle says, “Eskom's performance inefficiencies have also led to chronic loadshedding and flawed financial projections. The Multi-Year Price Determination (MYPD) methodology’s Regulatory Clearing Account (RCA) is highly problematic because it allows Eskom to recover lost revenue from consumers through future rate hikes. We believe this disproportionately penalises consumers for Eskom's inefficiency, leaving taxpayers and end-users to bear the financial burden of Eskom's mismanagement.”

SAFCEI also points to poor oversight in maintaining Eskom’s aging infrastructure and mismanagement during the construction of Medupi and Kusile power stations, which have contributed to soaring costs. Adding to Eskom’s financial woes are unpaid debts from government entities, municipalities, and consumers, along with escalating electricity theft. With repeated national Treasury bailouts, SAFCEI argues that essential public resources are being redirected to cover Eskom’s failures, exacerbating the strain on South African taxpayers.

She says that these proposed price hikes come at a time when more affluent consumers are increasingly moving away from the national grid in favour of private generation, such as solar power. Historically, the higher tariffs paid by these consumers helped subsidize lower rates for poorer households. We believe that Eskom’s failure to adapt to the evolving energy landscape risks leaving vulnerable communities even further behind.

“Eskom is pushing NERSA to accept an unaffordable cost recovery model in its MYPD6 application, in opposition to the Electricity Regulation Act, which mandates NERSA with the responsibility of safeguarding the needs of customers, facilitating universal access to electricity and ensuring that Eskom’s tariffs reflect an efficient cost of supply. In its written comments to NERSA, SAFCEI says that the MYPD methodology presents a narrow and now outdated response to the energy crisis in South Africa, which makes it difficult to challenge Eskom’s unaffordable tariffs in any meaningful or legal way, thereby undermining genuine public participation”, adds Nangle.

"Expensive electricity is exclusive electricity," adds Kim Kruyshaar, energy consultant for SAFCEI. “Eskom must adapt to the reality of transitioning South Africa’s energy needs, and the government must take urgent action to ensure affordable, reliable electricity for all, particularly the most vulnerable.”

SAFCEI says that while Eskom’s cost of supply model impacts the poorest households, special tariff agreements are signed with members of the Energy Intensive User Group. It is problematic that industries are protected at the expense of electricity users.

The Public Affairs Research Institute (PARI) has raised concerns about the ineffective implementation of the Free Basic Electricity (FBE) programme and recommended changes, including ringfencing the FBE subsidy for low-income housing and direct Treasury funding for the FBE to Eskom to reduce its debt burden. Unfortunately, these reforms have been stalled, while energy poverty continues to rise.

While SAFCEI welcomes the recent improvements in electricity supply stability, it stresses that the energy crisis will not be solved until a holistic, coordinated response is implemented. Key government actors – including NERSA, National Treasury, Department of Energy and Electricity, COGTA and SALGA – must collaborate with Eskom to address the systemic issues within the energy sector. The future of South Africa’s economy and its citizens depends on an immediate and coordinated response to the energy crisis.

SAFCEI has submitted written comments to NERSA on the MYPD6 and has signed onto an open letter by Project 90 by 2030 to Minister Ramakgopa, requesting an urgent review on electricity pricing policy. SAFCEI will also be making an oral submission at the public hearing taking place on 18th November 2024 in Cape Town.

Some faith leaders, who are also concerned about the issue, shared some comments:

Pastor Isaac de Jong from Mitchell’s Plain says, “The current high electricity tariffs are already pushing South African families, even the middle-income households have to choose between food and electricity. If Eskom’s proposed increase is approved, crime will rise, leading to illegal connections of electricity and cable theft. The lack of public consultation on this is likely to spark protests across the country.”

Lydia Petersen also from Mitchell’s Plain says, “South Africans are being asked to bear the financial burden of Eskom's inefficiencies, yet these proposed tariff increases will deepen inequality and push struggling households further into poverty. We need a fair energy transition that prioritizes affordability and accountability.

Miralda Mothibi from Gugulethu says, “Eskom can do this and see nothing wrong is an injustice, there ought to be a hold on tariffs, and an independent committee, to justify all the increases. The cost of living is not affordable, the elderly are severely affected, and most households are dependent on seniors and social stipends. Very little as is. There is just not enough. Eskom’s disregard for the impact of these increases is an injustice. There should be a halt on tariff hikes, with an independent committee to justify all increases. The cost of living is already unaffordable, and the elderly, who are dependent on social grants are the most severely affected. There simply isn’t enough to go around.”