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Eskom Granted 25% Tariff Increase – Is It Time To Go Off Grid?

Author: Jason Snyman
Date: 2019-03-08
Beleaguered state-owned-vampire, Eskom, has been granted three consecutive years of tariff increases. With electricity about to become a whole lot more expensive, we ask the question, is it finally time to go off grid?

Over a period of 10 years, from 2007 to 2017, Eskom’s electricity prices have increased by around 356% - while inflation, over that same period, was just 74%. Brace yourselves, because as of 1 April 2019, electricity is going to be a whole lot more expensive. 

Last year, we reported on Eskom’s desperate plea to the National Energy Regulator of South Africa for three consecutive 15% annual tariff hikes, necessary to cover all outstanding debt. These proposed hikes would allow Eskom to bring in revenue of R219bn for 2019/20, R252bn for 2020/21 and R291bn for 2021/22.

It certainly seemed that the power utility would be doomed, without a shadow of a doubt, if these requests weren’t met – and for a while there it didn’t look like they would be acknowledged at all.

Then came the load-shedding, and ploy or not, the threat of plunging South Africa into permanent darkness struck home, and it worked. 

Just a few days ago, energy regulator Nersa published the result of its public discussions on Eskom’s request – the tariff increases for the next three years have been granted. 

• 9.41% or allowed revenue of R206.34 billion for 2019/2020;

• 8.10% or allowed revenue of R221.8 billion for 2020/2021;

• 5.83% or allowed revenue of R233.1 billion for 2021/2022.

These hikes equate to a 25.2% increase over the next three years – a lot lower than requested, and still, it might not be enough. Nersa reached this total by considering a number of factors, including Eskom’s regulatory asset base, weighted average cost of capital, expenditure, IPPs, depreciation, R&D, levies and taxes, and more. 

Forsake the tumble-dryer for the washing line. Plan your cooking accordingly. Forget all about aircons and heaters and pool pumps and leaving the geyser on. Things are about to become unaffordable. 

What Can You Do About It?

It’s no secret that Eskom is a sinking ship – the greatest threat to the South African economy that we have ever known – and its days are surely numbered. The company needs R200 billion a year to operate – according to Eskom CFO, Calib Cassim – and it loses about R500 million each and every month.  

Now, we as consumers have to take a large number of factors into account. 

We can’t control how Eskom affects businesses, roads and households outside of our own. We can, however, choose to take our own properties off the grid – and rid ourselves of this expensive, relentless nightmare once and for all. There are other options. 

We also have to remember that this is part of why Eskom has to raise the tariffs to begin with. Eskom needs our money. More people going off grid means that less people are paying Eskom, meaning the company has to hike tariffs for existing clients.

And then, most importantly, we have to remember that it isn’t our fault that Eskom is in this mess to begin with – we didn’t roll out the red carpet for the Gupta family, and we didn’t hire unqualified idiots to run the company into the ground, we don’t have a bloated wage bill and we didn’t waste all of the money on doomed projects – nor is it our responsibility to bail them out. This is the government’s problem. This is a government failure. 

But, it affects everybody on the grid. Therefore, a situation has been created wherein the citizens of South Africa have no choice but to take on the responsibility of rescuing Eskom, again and again, whether it’s our fault or not. If we don’t pay, if we don’t shoulder the burden, the country may just finally collapse in on itself. 

But then, we’re already dealing with the increasing cost of fuel and food. We’re already burdened with taxes on top of taxes – a tax avalanche threatening to engulf us – thanks once more to government mismanagement, corruption, wastefulness and collusion. This country’s government is rotten, gangrenous, from the municipalities up.

This might make you sympathetic. Or it might make you angry. Or, it might make you proactive. 

Let’s take a look at how to go about going off grid, and how much it’ll cost. 

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