Upward pressure

At the first meeting between members of the Cabinet and senior business leaders since the formation of the Government of National Unity, it was agreed that the National Energy Crisis Committee (Necom) should be repurposed, as the risk of loadshedding continues to decrease.

Energy Council of South Africa CEO James Mackay said the aim was now to shift focus from interventions aimed at arresting the operational crisis at Eskom’s coal stations to addressing system-wide pressures, including growing concern over electricity affordability.

To be sure, the issue of affordability is fast replacing loadshedding as South Africa’s next electricity crisis.

Necom’s repurposing to focus on this problem and other system- wide constraints is important but has not come soon enough to make an immediate difference.

Eskom and the National Transmission Company South Africa (NTCSA) are already well advanced in preparing to submit allowable-revenue applications for the coming three years, starting on April 1, 2025.

It has emerged that Eskom has been consulting with the National Treasury and the South African Local Government Association on an application that will result in a 36% hike in the unlikely scenario that it is approved as is.

Be that as it may, there are slim prospects of moderating the increase to inflation-type levels without massive taxpayer support, the prospects for which are even slimmer.

Electricity and Energy Minister Dr Kgosientsho Ramokgopa has already voiced his unease at the prospect of such a hefty hike, arguing that all South Africans, but especially poor households, are already facing an affordability crisis.

The Minister believes the remedy lies in a review of the Electricity Pricing Policy, as well as in finding new ways to subsidise poor households, most of which are not benefiting from the current free basic electricity allowance.

However, such a review has not yet started and will take months, if not years, to unfold.

Indeed, considerable work will be required to translate any new policy into a workable formula to replace the prevailing multiyear price determination methodology on which Eskom’s and the NTCSA’s upcoming applications will be based.

In addition, participants in the electricity supply industry, including municipal utilities, Eskom and the NTCSA continue to insist that tariffs are not yet at cost-reflective levels and that they also need to be restructured so that sales volumes and network and service charges can be fully unbundled to reflect these distinct costs.

What’s more, there is still a need for large-scale investment in new electricity assets, including new and cleaner power plants, as well as national and regional grids, which are creaking under the weight of years of underinvestment and, in some cases, poor planning and maintenance.

Given the current mixed messages about the electricity tariffs, if could well fall to Necom to provide South Africans with a frank assessment of reality, which is not a pretty one.

The truth is tariffs are going to rise further and any move to cap them artificially will have serious long-term consequences.