Durban ratepayers are concerned that they are footing the bill for the increasing number of informal settlements illegally connecting to the electricity supply.

This follows the National Energy Regulator of South Africa’s (Nersa’s) publication of Eskom’s Multi-Year Price Determination (MYPD) revenue application for the period of Eskom’s financial years (FY) 2026 to 2028.

In the document, the proposed average price increases for Eskom direct customers are 36.15% (April 1, 2025, to March 31, 2026), 11.81% (April 1, 2026, to March 31, 2027) and 9.10% (April 1, 2027, to March 31, 2028).

Eskom is applying for total revenues of R446 billion for FY 2026, R495bn for FY 2027, and R537bn for FY 2028.

Recently, the Human Settlements Portfolio Committee revealed that there were over 590 urban informal settlements ‒ which comprised an estimated 316,000 households, in eThekwini. Adding to taxpayers’ burden is the 338 hijacked government buildings in South Africa. In the eThekwini Municipality, a total of 76 buildings were declared derelict, abandoned, hijacked and overcrowded. Theft of electricity was rampant.

The eThekwini Ratepayers and Residents Association (ERRA) spokesperson Ish Prahladh stated that giving free electricity to the informal settlements should not be the burden of the ratepayer.

"Government has allowed the mushrooming of informal settlements. They have no control over it," he said.

Bluff Ratepayers and Residents’ Association (BRRA) chairperson Norman Gilbert said that as Eskom enters its sixth MYPD cycle, it is essential for consumers to understand the driving forces behind this pricing methodology. These include various production costs, including labour and input costs.

Gilbert was concerned that many South African Social Security Agency (Sassa) grant recipients spend up to half of their money on electricity, with some only able to use their geysers once a week due to high costs. Gilbert said that with electricity already a major expense, these proposed increases are unsustainable for households across the country.

“It is unjust to expect consumers to shoulder the burden of Eskom’s inefficiencies. The proposed 36% price increase in the first year is alarming, particularly for low-income households already struggling to afford basic electricity,” Gilbert added.

Gilbert said that middle-income families, who contribute significantly through taxation, are similarly unable to absorb such steep price hikes. Gilbert said the knock-on effect of these price hikes will severely impact the small, medium, and micro-enterprises (SMME) sector.

“These businesses, already facing tough economic conditions, will struggle to remain profitable, leading to potential closures and higher unemployment, exacerbating the country’s economic challenges,” he said.

Gilbert said that in addition, there are growing concerns regarding the City’s provision of free electricity and water to informal settlements and shack dwellers; and these costs are recovered through the rates base, meaning that approximately 30% of residents are funding 100% of these services. Gilbert said that this model is unsustainable and places an unfair burden on ratepayers.

“The proposed increases and their ripple effects highlight the need for a balanced and fair approach to energy pricing that does not disproportionately harm vulnerable households, the middle-class, and the broader economy,” Gilbert concluded.

In accordance with its revenue decision, Nersa will then make tariff decisions for implementation from April 1, 2025. Eskom can only implement tariff decisions made by Nersa.

Chief financial officer of Eskom, Calib Cassim, said Nersa would conduct an extensive public consultation about Eskom’s revenue application.

Cassim said: “We urge as many stakeholders as possible to become involved so Nersa can determine a key component in the funding of a constant electricity supply that drives economic growth and our quality of life for years to come.”

Nersa will make the decision on the revenue Eskom can receive. Further migration towards cost reflectivity to cover the full cost of capital would be considered in subsequent applications. This would minimise the impact on the taxpayers.

Cassim said that as Nersa makes its decision, it would consider affordability for identified vulnerable sectors including indigent customers and certain industrial sectors.

“Eskom has made its revenue application based on the costs it will incur to efficiently provide electricity to the customer and it is a critical component in ensuring Eskom continues to provide reliable electricity services while improving its financial sustainability, through a migration to cost-reflective prices,” Cassim concluded.

Eskom is required to submit to the regulator the revenue it requires in order for Nersa to make its determination.

In addition to the MYPD 6 application, Eskom has submitted a retail tariff plan (RTP) to Nersa outlining proposed structural changes, which are expected to be implemented from April 1, 2025, once all Nersa approval and governance processes are concluded. The RTP aims to introduce cost-representative pricing that supports the long-term sustainability of all participants in the electricity supply industry.

WhatsApp your views on this story at 071 485 7995.

Daily News