Eskom tariff hike ‘devastating’ for consumers

2014-10-07 16:15

Increasing electricity tariffs will have devastating consequences for the country’s indebted consumers.

“Total consumer debt is now topping R1.44 trillion and the debt to income ratio is hovering around the 75% mark, which means that three-quarters of a family’s income is already pledged to a variety of creditors,” Neil Roets, chief executive of debt counselling company Debt Rescue, said today.

“With the exchange rate now dropping on an almost daily basis, inflation on the increase and now a double digit increase in the electricity tariff, consumers are in for a very bumpy ride.”

He said the country’s middle class who had recently escaped the debt trap would be forced back into poverty and their only option would be to apply for debt counselling.

The National Energy Regulator of South Africa (Nersa) announced on Friday that the price of electricity would increase by 12.69% next year.

Nersa approved Eskom’s plans to recoup losses after it had under-recovered money during the second multiyear price-determination control period between 2010 and 2013.

The regulator approved the implementation plan of the regulatory clearing account balance of R7.8 million. The account balance would be a once-off recovery from the standard tariff customers as well as other Eskom customer categories and would only be implemented in the 2015-2016 financial year.

This meant consumers would pay an extra 4% on top of the 8% hike approved under the third multiyear price-determination control period.

The clearing account is a regulatory mechanism that allows Eskom to adjust for over- or under-recovery of revenue.

The Congress of South African Trade Unions said workers could not afford the “outrageous” increases in the prices of basic services.

“The main problem with the decision is that its rules make it legal for Nersa not to always consult the stakeholders when allowing Eskom to recover losses.

“We call on the department of public enterprises, as the shareholder of Eskom, to investigate if these claimed over-expenditures are not linked to the delays in the completion of some of the units of the Medupi Power Station due to shoddy workmanship by private sector contractors.”

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