NERSA’s proposed new Eskom tariff model will not provide relief to consumers facing high electricity prices

27 September 2021

While the DA notes the step taken by the National Energy Regulator of South Africa (Nersa) to change its Eskom tariff determination model, from its current revenue-based approach to a new cost-to-serve system, we strongly believe that any pricing model that seeks to protect Eskom’s monopoly will only lead to high electricity prices for overburden consumers.

The proposed cost-to-serve system still does not address the fundamental flaws inherent in NERSA’s approach of determining electricity tariffs that are accurate and cost-reflective. Without the requisite skills to perform the tariff determination process effectively, Nersa will still roll over and accept any tariff increase that Eskom requests.

In response to a call for written submissions by the National Energy Regulator of South Africa (NERSA) on its discussion document for the new tariff determination model, the DA will advocate for a consumer-centric approach that protects consumers from perennially high electricity costs. The only way to reduce the cost of electricity over the long term is to increase competition through:

The decentralization of electricity supply, to allow municipalities with the technical and financial resources to source or generate their own power.

Opening up the grid to Independent Power Producers so as to increase competition and lower the costs of electricity production.

Incentivising and assisting individuals to generate electricity at their private residences for their own consumption. This will alleviate pressure from the grid, helping to lower the loadshedding burden for other families, and importantly for businesses.

Nersa’s proposed cost-to-serve approach will not provide any relief to consumers overburdened by high electricity prices because it is still basing its cost determination on Eskom’s costly electricity generation model. Eskom’s aging generation fleet is producing electricity at a very high cost and to offset this, the power utility is transferring the cost to consumers.

The reality is that South African residents are being expected to pick up the tab for government failures to reform electricity generation, transmission, and distribution and to better regulate the sector. Instead of opening up our electricity supply to competition, the ANC and NERSA have shored up the monopoly controlling electricity generation in South Africa for the past 25 years.

With Nersa due to make a decision next week on Eskom’s new tariff application for the next three years, the DA still holds the position that this application should be rejected. Tens of thousands of South Africans lost their jobs due to Covid-19 and for those who still have jobs, a disproportionate amount of their income is now being spent on energy. An Eskom tariff increase will only worsen the economic hardships being faced by consumers across the country.

Issued by Kevin Mileham, DA Shadow Minister of Mineral Resources and Energy, 27 September 2021