Energy: Electricity tariff hike could spark ‘grid defection’

In the context of declining renewable energy costs, another hike in Eskom tariffs could result in largescale ‘grid defection’ – undermining the ‘sustainability’ of municipalities relying on electricity revenues, as well as the power utility’s ‘financial viability’ (Engineering News). Pam Saxby, for Legalbrief Policy Watch, notes South African Reserve Bank Governor Lesetja Kganyago shared these observations during a recent editors’ forum, when – noting reduced electricity demand from the grid across SA’s mining and industrial sectors – he said that smaller businesses, commercial buildings and higher-income households could soon also be ‘in a position to defect’. Should this happen, ‘large metropolitan councils … tapping the bond markets for funding’ will be especially hard-hit.

As Legalbrief Today has already reported, Eskom applied to the National Energy Regulator of SA (Nersa) in October for a 19.9% tariff increase, to be effective from 1 April and 1 July 2018 respectively for its non-municipal and municipal customers. Nersa is expected to announce its decision on 13 December. While Kganyago has apparently ‘supported’ the utility’s ‘earlier efforts to increase … tariffs to cost-reflective levels’, in his view ‘governance rather than finance’ is now the issue. ‘It’s because the institution is not run properly that it cannot get its finances in order,’ he told his audience. ‘This notion that, if they are not making budget, the answer is in higher tariffs, is a problem,’ Kganyago said, adding that ‘prices … (can) only rise so far before the scales (are) tipped’.