31.3% Eskom price increase

[Sting]

So now our Telco operators must pay more for their electricity on which they are totally reliant to power their networks; who is going to end up paying for that???

/UPS is more expensive that Eskom power.

 

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The economics of electricity infrastructure are similar to those of telecoms infrastructure in some ways. However, there are some important differences, as has been learnt in various countries around the world. Hence, although there may well be an argument for some form of competition in the sector, it's not clear that this could work in practice. Artificial mechanisms have been created in some markets to give consumers a choice of providers, but few have fundamentally changed the price of electricity (except for the well-known example of California some years ago, where the whole scheme collapsed, along with the electicity grid itself - http://en.wikipedia.org/wiki/California_electricity_crisis).

Eskom's previous prices, which were the lowest in the world, were the result of very low input costs and an efficient generation and transmission model - a single, co-ordinated infrastructure, with no duplication, and with local distribution largely handled by local municipalities. The low input costs were partly fortuitous - large amounts of relatively cheap coal, with the power stations built on top of the coal mines. More or less any other generation approach is more costly, despite what you may have heard.

At those prices, there was simply no incentive for anyone else to build electricity infrastructure - even though the official policy was to encourage independent power producers, and to create some form of competitive market. Ironically, it is only now that Eskom is raising its tariffs to fund the massive new investment that is required to keep pace with the growth of the economy that it is becoming viable to build competitive infrastructure. However, anyone doing so would be at a significant disadvantage to Eskom, which has massive economies of scale.

Unlike telecoms, competitive producers of electricity cannot really compete on products (electricity is electricity, after all), or even on customer service (despite Eskom's contact centre). There's also very little scope for innovation and growth of new markets (compared, for example, to mobile phones, broadband, or triple play in the telecoms sector). What is left if pure price competition - a bit like submarine cables delivering bandwidth - and hence the economics above apply.

On the whole, the only thing that is wrong with this tariff increase is timing. It should have happened a long time ago (or been done more slowly, over a period), and we wouldn't be where we are now.

Fit a solar geyser, and use high efficiency lights, and you'll probably be able to keep your account where it was, and you'll be saving the planet.

 

[Spyral]

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first of all there was a study a couple of weeks ago that south africans are paying in the top ten highest electricity prices in the world.
Second of all 90% of us have cut so much we cant cut anymore. Alot of people cant afford solar geysers they are still expensive and the refund you get from Eskom only covers the install costs of R1500, most ppl only switch on there geyser's for 1hour my geyser has not been on since the last price increase I have a fire pit that I boil 50L water every day for bathing and cleaning I stay in a rural area on a small holding in the karoo and we cook on a bio gel stove & on the braai and we still use 9-10 units a day 80 of house lighting is on solar panels that I bought at the china shop for R250 consisted of a 12v 7.2amp battery a solar panel, 180w inverter and that powers 16x 11w compact savers and I am running 4 of them. So you tell me where can I still save.

 

[DragonLogos]

I think Eskom Sucks - the Song... the Video (only 1.5 megs)

http://www.dragonlogos.co.uk/video/eskom_video.wmv

 

[Garson007]

As to the needing much more energy to heat it from cold, I'd sure like to see some evidence of that... heat loss drops as the water temperature approaches ambient, the theory is that not maintaining the geyser at it's maximum prevents the higher heat loss associated with the higher temperature.

Physics, bitches.

Edit:

The economics of electricity infrastructure are similar to those of telecoms infrastructure in some ways. However, there are some important differences, as has been learnt in various countries around the world. Hence, although there may well be an argument for some form of competition in the sector, it's not clear that this could work in practice. Artificial mechanisms have been created in some markets to give consumers a choice of providers, but few have fundamentally changed the price of electricity (except for the well-known example of California some years ago, where the whole scheme collapsed, along with the electicity grid itself - http://en.wikipedia.org/wiki/California_electricity_crisis).

Eskom's previous prices, which were the lowest in the world, were the result of very low input costs and an efficient generation and transmission model - a single, co-ordinated infrastructure, with no duplication, and with local distribution largely handled by local municipalities. The low input costs were partly fortuitous - large amounts of relatively cheap coal, with the power stations built on top of the coal mines. More or less any other generation approach is more costly, despite what you may have heard.

At those prices, there was simply no incentive for anyone else to build electricity infrastructure - even though the official policy was to encourage independent power producers, and to create some form of competitive market. Ironically, it is only now that Eskom is raising its tariffs to fund the massive new investment that is required to keep pace with the growth of the economy that it is becoming viable to build competitive infrastructure. However, anyone doing so would be at a significant disadvantage to Eskom, which has massive economies of scale.

Unlike telecoms, competitive producers of electricity cannot really compete on products (electricity is electricity, after all), or even on customer service (despite Eskom's contact centre). There's also very little scope for innovation and growth of new markets (compared, for example, to mobile phones, broadband, or triple play in the telecoms sector). What is left if pure price competition - a bit like submarine cables delivering bandwidth - and hence the economics above apply.

On the whole, the only thing that is wrong with this tariff increase is timing. It should have happened a long time ago (or been done more slowly, over a period), and we wouldn't be where we are now.

Fit a solar geyser, and use high efficiency lights, and you'll probably be able to keep your account where it was, and you'll be saving the planet.

QFE

 

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first of all there was a study a couple of weeks ago that south africans are paying in the top ten highest electricity prices in the world.

I'm not aware of the study. However, it seems likely that it would have been based on a Purchasing Power Parity model, that uses pricing normalised against per capita income to show affordability rather than absolute price. PPP is a great measure if the cost base is local e.g. labour costs, or local raw materials. However, power station turbines and generators cost much the same in absolute terms anywhere in the world, and this is what the higher tariffs are actually paying for. These costs are in the tens of billions, compared to the millions that Eskom pays a few fat cats.

Second of all 90% of us have cut so much we cant cut anymore.

I doubt it. You have certainly cut dramatically, but there are plenty of urban users who could cut a lot more, but haven't. No doubt they will now. Of course, the problem is a bit circular, since it's partly reduced demand that has led to increased tariffs. Eskom's investment plans need a fixed amount of money from their customers, not any particular tariff level.

You do raise the broader question of who should be carrying the cost of electricity. At the moment, the greatest burden is on the middle income consumer. Low income consumers are cross-subsidised, and large industry benefits from bulk discounts. There are good reasons for both of these - social in the one case, and entire sectors of the economy that depend on electricity for their existence in the other.

The urban-rural divide is a similar socio-political question. Can a developing country with an annual urbanisation rate of 1%, and with 60% of the population urban, and the vast majority of the economy in urban areas, afford to build expensive rural electricity distribution infrastructure to areas where the majority of users would have to be subsidised? It makes more economic sense to create local, sustainable, off-grid infrastructure in these areas, something that you seem to be well on the way to doing. There are some very good examples of this in a number of countries.