South Africa’s electricity price shock

Electricity in South Africa is among the most expensive in the world, a new survey from NUS Consulting has shown.

According to the group’s International Electricity & Natural Gas Report and Price Survey 2013, South Africa has the most expensive natural gas and the 15th most expensive electricity out of 18 countries surveyed.

Electricity prices in South Africa showed the third-highest increase of 12.3% over the survey period, while the price of natural gas rose 101.7% to 12.55 US cents (R1.25) per kilowatt hour.

Electricity prices in SA are set to increase by an average of 8% for the coming year 2013/14, in line with the Multi-Year Price Determinant (MYPD) granted by National Energy Regulator of South Africa (Nersa) earlier this year.

“The short and long term outlook for electricity is for prices to increase as Eskom continues to deal with generation and infrastructure costs,” the NUS report said.

Electricity price changes
Electricity price changes (Click to enlarge)

Looking at gas

Aside from PetroSA, which produces gas for its own purposes, the gas market in South Africa is dominated by Sasol Gas.

According to NUS the survey, Nersa has applied a cap on gas prices in order to protect consumers, but has approved allowable revenue of R936 million for the 2013 financial year running from July 2013 to June 2014 and R1 billion for July 2014 to June 2015.

Though gas only accounts for 3% of South Africa’s current energy consumption, it holds great risks to industrial users’ future profitability. Industrial users are a great contributor to employment.

South Africa’s total gas reserves stood at 770 billion standard cubic feet in March 2012, was the only country surveyed without any forecast price reductions for gas.

“Going forward, gas prices will also increase and these prices could rise for industrial consumers by as much as 30 to 40 percent (at a maximum),” NUS said.

Gas price changes
Gas price changes (Click to enlarge)

DA Shadow Deputy Minister of Energy, David Ross, called on Energy Minister, Dipuo Peters, to take the future of gas, its pricing, as well as its contribution to the national energy mix into account before releasing the draft Integrated Energy Planning Report in July 2013.

“In the meantime, the DA will make an urgent submission to the National Energy Regulator of South Africa (NERSA) to review the current method of increasing the price of different energy sources simultaneously,” Ross said.

“The continuous increase in the price for energy in South Africa not only hurt South African households but also places significant constraints on economic growth and job creation,” Ross said.

“We need to plan effectively for our future to affordably power South Africa into the future.”

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