Expect big electricity price hikes in South Africa

Eskom has applied to the National Energy Regulator (Nersa) to allow it to increase electricity prices between 2019 to 2022 as it feels the impact of load shedding.

The application has been heavily criticised by the Democratic Alliance which said that consumers will effectively have to pay 10-15% more for electricity, followed by tariff increases of 50% over the next few years.

In addition to 418 hours of load-shedding in 2019 alone, the party said that consumers simply cannot afford Eskom’s proposed tariff increases.

“The utility has been entirely unable to demonstrate that they can operate prudently and efficiently, with gross financial mismanagement and procurement processes that have not been competitive enough,” it said.

“Eskom has demonstrated that it is wholly incapable of managing South Africa’s electricity supply. To allow an increase in the rate of their tariffs would only reward them for their failure.”

Despite these objections to Eskom’s application, analysts have warned that businesses and consumers should prepare for a substantially higher water and lights bill in 2020.

Given the weak state of many local governments’ finances, it is likely that council rates and taxes and municipal charges will once again be a key issue in 2020, said John Loos, property sector strategist at FNB.

Total council rates, taxes and charges costs/square metre have risen by a cumulative 559%from 2000 to 2018, according to MSCI operating cost data, he said.

By comparison, economy-wide inflation, as measured by the GDP deflator, was a far lesser 220.2% over this period.

Loos said that it is unlikely that above-inflation increases in municipal rates, taxes and charges will come to an end in the near term, given the weak state of local government finances in many districts of the country.

Read: Government wants to build a new power company – outside of Eskom

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Expect big electricity price hikes in South Africa