Eskom has confirmed that it will increase its electricity tariffs following a ruling in its favour by the High Court.
The substituted decision made by the court addressed an incorrectly deducted amount of R69 billion from the multi-year price determination (MYPD) which determines Eskom’s electricity prices.
The court found in favour of Eskom, stating that the power utility should recover R69 billion in a phased manner over a three-year period.
When asked whether it will need to apply for leave to increase prices, Eskom told MyBroadband that the decision has already been made, and it will allow Eskom to increase the average price of electricity in South Africa.
“The Court Judgement allows for the recovery of incorrectly deducted equity support that was provided by the government,” Eskom said.
“It allows for the Eskom average electricity price to slowly migrate towards what the efficient price of electricity is.”
Eskom said that the average price of electricity at the moment is much lower than what it costs to efficiently produce the electricity.
This decision allows for the narrowing of this gap, the power utility said.
10% price increase expected
Eskom said that this ruling would allow for the rectification of “inadequate revenue decisions” which were made by the national energy regulator.
“Eskom is in the process of migrating to a level where it can recover its efficient costs of providing a service,” the power utility said.
“Eskom’s balance sheet and the taxpayer has been providing a subsidy to the electricity consumer for many years.”
It added that it expected to increase electricity tariffs in South Africa by 10% as a result of this ruling.
These changes will take effect for the 2021/22 financial year, Eskom said.
Electricity is cheap in South Africa
It should be noted that while electricity tariff hikes are undoubtedly unpopular, they are not necessarily unsubstantiated.
After seeing large annual increases for many years, it is natural to assume South Africa’s electricity prices are now expensive compared to global standards.
This is, however, not the case. South Africans paid such a low price for electricity between 1994 and 2007 that, even despite large increases for over a decade, we still pay much less than most countries.
Data shows that South African electricity prices are relatively low compared to the rest of the world.
The charts below, courtesy of Statista and Global Petrol Prices, show how local prices compare to other countries.