South Africa’s electricity company faces backlash amidst proposed tariff hike

The proposed 36 per cent electricity tariff hike by South Africa’s power utility firm, Eskom, met fierce public objections at the beginning of a nationwide public hearing on Monday.

The hearings, hosted by the energy regulator, are meant to solicit public views on the proposed tariff hike. Electricity minister Kgosientsho Ramokgopa previously conceded that the hike is untenable.

Eskom has been mired in financial difficulties for years amidst routine power blackouts in many South African homes. However, in 2024, there has been a dramatic turnaround in its performance, which has allowed Africa’s most industrialised economy to go more than 200 days in a row without power cuts, boosting investor sentiment and leading to expectations for faster growth.

Determined to solve its financial challenges while providing uninterrupted power, Eskom proposed a tariff increase.

Eskom submitted electricity tariff applications to energy regulator Nersa for either the year ahead or several years at once, after which Nersa was expected to consult the public before deciding whether to approve an increase. Nersa rarely grants Eskom the full increase it seeks.

In its latest application, Eskom asked for increases of roughly 36 per cent, 12 per cent and 9 per cent in the next three financial years.

Nersa is due to announce its decision on 20 December.

Debt crisis

Eskom is also struggling with unpaid bills by thousands of consumers. Recently Mr Ramokgopa stepped in to stop the utility firm from bringing Johannesburg to its knees over unpaid bills.

Eskom planned to suspend power supply to the economic hub in December unless the municipality settled its debt of 4.9 billion rand ($275 million).

PREMIUM TIMES learnt that South African municipalities, or local governments, owe Eskom about 90 billion rand ($5 billion).

“Despite all the avenues that Eskom explored and efforts to accommodate [Johannesburg], the matter has reached a point where Eskom can simply no longer afford to accommodate [Johannesburg] without putting further financial strain on and harming its own business,” Eskom said.

However, residents bemoaned electricity cut-offs by Eskom with a group of businesses saying they “strongly condemns this move as unjust, counterproductive, and potentially harmful to the residents and businesses of Johannesburg.” Some also accused Eskom of overbilling.

Disagreements between the utility company and consumers are not new in South Africa. In 2023, there were allegations of consumers bypassing meter verification but no metering faults were detected after an exercise by technicians. That dispute was resolved.

Despite last December’s resolution, the two parties are back at war. Mr Ramokgopa said another verification and assessment exercise is needed to locate the “point of failure” and evaluate it.

As an ex-mayor and current Eskom shareholder, the electricity minister is aware of the frosty links between defaulting municipalities and cash-strapped Eskom. Independent of the outcome of the evaluation, Johannesburg will, at the end of November, settle the bill of 1.4 billion rand ($78 million).

“The technical expert will come back to myself, executive mayor, and both teams from Eskom and City Power to say to us that this is the true fact of the situation,” said Mr Ramokgopa, whose priority is, among other things, to ensure electricity security.

The technical team’s update is due on 25 November – about three weeks before 14 December Eskom-imposed deadline for the cut-offs.

Regardless of the verification process, the government will not let Eskom effect power blackouts, officials said.

Experts said the effects will be too debilitating. Eskom’s tiff is with the local government, not end-users who are now placed in the middle of the fracas.

Meanwhile, authorities and business entities in Johannesburg have done very little to lead the way in reducing carbon emissions.

Eskom’s immediate threat for now is falling revenues as users get off the grid. Eskom, an ex-monopoly, also has independent power producers to contend with. “When entities like [the City of Joburg] fail to pay Eskom timeously or at all, [that scenario] forces Eskom to borrow additional money at premiums to fund operational costs,” the firm said in a statement.

“Borrowing money to fund operational cash shortfalls caused by the failure of municipalities.”

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Having recently attached bank accounts belonging to a small-sized local government to recover a bewildering 8 billion rand debt, nearly a tenth of unpaid municipal bills, Eskom is determined to recover unpaid bills.

However, any outage would contradict Eskom’s role of advancing “economic growth” in a country already beset by worsening poverty.

According to Statista, a third of the workforce, or 8 million people, is now jobless.

With the debt crisis threatening its existence, Eskom would have to brace up for a tough 2025 if the regulator rejects the rate hikes.