Government wants to introduce a long-term electricity price for South Africa

 ·14 Feb 2022

Government is considering the introduction of a long-term electricity price outlook to give customers more time to prepare for inevitable hikes.

The proposal is included in the draft Electricity Pricing Policy (EPP), which has been published by the Department of Mineral Resources and Energy for public comment.

Given that customers have long-term planning requirements, there is wide support for the publication of a long-term price outlook, the department said.

“The price forecast should cover two aspects namely the average national price of the entire value chain up to the point of sale to municipalities, as well as the average municipal price to each municipality’s clients/consumers.”

The price forecast should include a reasonable period of not less than 10 years, and should be updated frequently to signal the overall expected trend in electricity prices, it said.

“Ideally, the forecast should show the contribution of generation, all of its major sources inclusive of SOE-owned and independent/privately-owned, transmission and distribution to the forecast price level for some representative notional customers.

“These forecasts should be treated as indicative and will not be binding on any of the players.”

Future price hikes 

Rising electricity prices have been a point of contention in recent years as consumers grapple with steep hikes and intermittent supply due to load shedding.

In its presentation to regulator Nersa on 17 January, Eskom said that the latest request for a 20.5% increase was partly being driven by purchases from independent power producers (IPPs) and carbon taxes – two costs that are outside of its direct control. These two costs alone make up around 13.8% of the requested increase, it said.

The group has also indicated that it plans to ask for a further 15.07% increase in 2024 and a 10% increase in 2025.

However, this will depend on the actual increase that Nersa grants Eskom this year, with the regulator rarely giving the power utility the full increase that is asked for.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.


Read: Government considering taking on Eskom’s R392 billion debt

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