South Africa’s electricity price nightmare

3 years ago 2

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Eskom’s average annual electricity tariff increases over the past 15 years have surpassed inflation drastically, an analysis from energy expert Anton Eberhard has revealed.

Despite this, the power utility says the National Energy Regulator of South Africa’s (Nersa) regulated tariffs still don’t reflect its costs.

South African residents will see an average increase of 18.65% from 1 April 2023, with the hike for next year predicted to be 12%. Inflation for the period is expected to be less than 5%.

Eberhard tracked Eskom’s average annual tariff hikes from the 2007/9 financial year to 2021/22 and compared them to inflation over the same period.

The most significant increase occurred in the 2009/10 financial year when Nersa approved a price hike from 24.97c/kWh (South African cents per kilowatt-hour) to 31.90c/kWh.

The increase works out to 27.8%, which was only slightly higher than the 27.5% increase the previous year.

The 2010/11 financial year also saw a significant increase when the tariff increased from 31.90c/kWh to 40.30c/kWh — a hike of 26.3%. Nersa approved a 24.7% increase the following year.

However, since the 2011/12 financial year, Eskom’s annual tariff hikes have been comparatively tame, but still way higher than inflation.

Annual price hikes implemented between the 2011/12 and 2021/22 financial years ranged from 1.7% to 16.4%. However, it appears to be on an upward trend once again.

Nersa’s approved electricity tariff increase in the 2021/22 financial year amounted to 14%.

Nersa approved an electricity tariff increase of 18.65% on Thursday, 12 January 2023, after Eskom asked the regulator for a 32.02% price increase in its annual tariff application.

The regulator also approved a 12.74% increase set to take effect from 1 April 2024.

In a separate analysis, Daily Investor tracked Eskom’s annual average tariff increases from 1950 to 2021 using annual reports published by the power utility.

It revealed that, in 2008, Eskom’s average selling price for electricity was 19c per kilowatt-hour (kWh).

Over the next twelve years, it increased by 472% to 111c per kilowatt-hour (kWh). It was the most rapid price increase in history and far exceeded inflation.

While the average annual increase Nersa approved for the 2023/24 financial year sits at over 18%, certain customers will only be subjected to a 10% increase.

Nersa approved a lower electricity tariff increase for low-income households in townships and rural areas.

Though these households won’t be as hard-hit, it’s worth noting that even the lower price increase is well above South Africa’s official inflation figures.

According to Nersa, Eskom submitted a last-minute application for the lower increase on 2 March 2023, which the regulator approved.

However, municipalities’ electricity purchases from Eskom will be subject to the 18.65% increase, and they will need to recoup that cost somehow as they can only increase their prices from 1 July.

A higher tariff hike for key industrial and urban customers will cross-subsidise the lower 10% price increase for Eskom Homelight 20A customers.

Nersa approved an almost 30% tariff increase for these industrial and urban electricity users to compensate for the lower increase approved for poorer South Africans.

“Key industrial and urban customers will realise an 18.65% increase plus an additional 7.37c/kWh to cater for the subsidy, which increases from 5.69c/kWh resulting in a 29.53% increase,” it said.

Eskom wasn’t clear regarding the specific industrial and urban customers that must pay 29.53% more from 1 April.