Eskom’s shocking annual price hike since 2007

Since the initial electricity blackouts in South Africa in 2008, the National Energy Regulator (Nersa) has granted Eskom an annual average increase of 22% a year for seven years.

In May, Eskom made an urgent application to increase the electricity tariff by 25.3% for the 2015/2016 financial year. This included the 12.69% price increase Nersa had already approved.

Various bodies were able to provide written submissions in response to Eskom’s re-opening of tariff negotiations, last week. Nersa said it would make a decision on a tariff hike on June 29.

Having avoided load shedding for 10 successive days earlier this month, Eskom has reverted back to a daily schedule – citing shortages of generation capacity as a result of technical faults at some units.

Acting Eskom CEO Brian Molefe argued last week that the pain of people paying more was far less than the damage power cuts would cause to the economy.

Tariff increase vs inflation

In a joint written submission to Nersa, professor Raymond Parsons from the North West University Business School, Professor Waldo Kruger from the North West Department of Economics, and professor Gavin Keeton, from Rhodes University of Economics, argued that a tariff increase would have serious economic effects.

“The electricity situation has become a huge liability to the economy and that needs to be changed,” the academics said.

They warned that electricity consumption is now already at low levels last seen a decade  ago.

With a fall in electricity consumption – or users switching to other sources of energy   supply permanently because of cost or supply uncertainties – Eskom’s finances deteriorate further, thus ostensibly requiring further tariff increases.

The cumulative impact of a seemingly endless cycle of tariff increases has come to have  negative consequences for the economy, which has slowed to less than 2% growth.

Real price of electricity

The paper pointed out that if Nersa grants the latest application in full, the electricity  price will appear to have doubled since 2009, with no end apparently in sight.

“To continue along this path of ever rising electricity costs with no clear end in sight, combined with a severe drop in confidence among both households and business about the supply and cost of power, (it) is a recipe for additional economic setbacks,” the paper said.

Electricity price and quantity

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Eskom’s shocking annual price hike since 2007