More electricity price pain coming for South Africa

Electricity users will face a heftier electricity bill come 1 April – and South Africans can expect more to come as power utility Eskom continues to push for “cost-reflective” pricing.

Last year, the National Energy Regulator of South Africa (Nersa) approved a 12.74% electricity tariff hike for the 2024/25 financial year, which will take effect on 1 April 2024.

2023’s electricity price hike of 18.65% (significantly less than the 32.02% increase Eskom asked for), in combination with the coming hike, means that South Africans will have seen a 33.8% increase in the electricity price over the two-year period.

Speaking to Newzroom Afrika, general manager of regulations at Eskom, Hasha Tlhotlhalemaje said the double-digit electricity price hikes for 2023 and 2024 are partly due to the previous lack of funding received to maintain its power stations, as well as having rates that do not reflect the true cost of electricity production.

Talking about the future of tariff hikes, Tlhotlhalemaje alluded to more increases to come, saying that Eskom is on a “migratory path,” trying to create tariffs that are “cost reflective” of the price of producing electricity.

Peter Attard Montalto, Managing Director of Kruthum (formerly Intellidex), previously stated that South Africa seemingly has no remaining alternatives for electricity pricing.

Commenting on the tariff hikes in 2023, Montalto said that electricity prices that would accurately reflect the cost for Eskom are about 40% to 45% higher than the existing rates.

Eskom has been trying to adjust its prices to this level as swiftly as possible in order to tackle its issues with decreasing revenue, escalating debt, and operational needs – hence, the massive price hikes.

‘Cheap’ electricity

In justifying the price hikes (and those potentially to come), Tlhotlhalemaje said that in a South African context, electricity is still cheap.

“If we compare ourselves with similar kind of customer groupings in other countries, South Africa’s electricity is still cheap… [so] we are trying to reach what we call the cost reflective level that actually covers the efficient cost of producing that electricity,” she said.

Tlhotlhalemaje also outlined that operational challenges faced by Eskom are a result of decisions (and lack thereof) made in the past.

“Remember that we are living in a very long-term kind of industry, so things that might have happened more than 10 years ago – the impact is being felt now,” she said, specifically discussing decisions relating to capacity.

“It’s not a sudden turnaround… and one of those contributing factors was that Eskom was not given enough funding to continue to maintain… power plants,” she added.

Independent political analyst Professor Sipho Seepe echoed parts of this, saying that the underfunding of Eskom started “due to the failure of (previous) administrations to heed expert advice to invest in the grid to match demand, broaden access to electricity and enable the country’s economic growth.”

“It is noteworthy that former President (Thabo) Mbeki was to admit that ‘Eskom was right and [the] government was wrong’,” said Seepe.

According to an economic bulletin written by economists Zaakirah Ismail and Christopher Wood and published by the South African Reserve Bank (SARB) last year – since load shedding started in 2008, electricity has increased by 450%, drastically outstripping CPI by 352 percentage points, with inflation recorded at 98% over the same period.

This is now set to be even higher, with 2023 CPI averaging around 6% (versus the hike of 18.65%) and 2024 CPI projected to average 4.5% (versus the coming hike of 12.74%).

Calculations by MyBroadband show that from 1 April, customers using the following will roughly pay:

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