Eskom recently won a major court battle which will allow it to recoup billions in lost revenue through increased electricity tariffs.
The North Gauteng High Court found that Nersa, the authority which determines the allowable tariff increases Eskom may implement every year, had been in the wrong for not allowing Eskom to collect R69 billion in unforeseen expenses.
The power utility will now be able to introduce significant tariff increases over and above the previously-approved hikes over the next few years.
Under the court order, Eskom is allowed to increase average electricity prices to 128.24c/kWh, 9.8% more than the 116.72 c/kWh Nersa had originally approved.
This will amount to a total annual increase of 15%, which Eskom plans to implement from April 2021.
This is merely the beginning of the process, however, and analysts expect another price jump by more than 10% in April 2022.
These increases follow regular electricity price hikes over the last decade which far exceed the annual inflation rate.
In the last three years alone, Eskom has increased the average price of electricity by nearly 25%.
The power utility’s mountain of debt continues to increase, and its much-talked-about turnaround is taking longer than many would hope.
South Africans may soon be experiencing annual price increases last seen at the start of the country’s energy crisis in 2007/2008.
Eskom’s average electricity price over the years
For around the first 10 years of the democratic South Africa, Eskom’s average electricity fees were among the lowest in the world.
Between 1994 and 1999, the yearly price increase never exceeded the annual inflation rate, which meant that the real price of electricity was actually on the decline.
In the early 2000s, prices remained relatively flat and even dropped slightly in 2004.
However, after load-shedding was first implemented in 2007, prices skyrocketed.
In 2008, the average electricity price climbed from 19.80 to 25.24 c/kWh, a hike of 27.5%. The biggest increase to date followed in 2009, with a 31.30% jump.
The following three years saw additional hikes of around 25%.
The table below shows the nominal average price for electricity from 1994 to 2020, with the average price increase for each year.
The yearly inflation rate according to Statista is also indicated, as well as the real (inflation-adjusted) average electricity price.
The information was compiled using Eskom’s Tariff Books and historical price data available on its website.
|Eskom electricity tariffs 1994-2020|
|Year||Average (c/kWh)||Average price increase||Inflation||Inflation-adjusted price (c/kWh)|
Impact of load-shedding
When looking at the inflation-adjusted prices, South Africans enjoyed the cheapest electricity prices – between 37 and 38 cents per kW in today’s terms – from 1999 to 2004.
Between 2007 and 2020, however, Eskom’s average electricity price rose by around 460%, not accounting for inflation.
When we factor in inflation of around 100% from July 2007 up to July 2020, the average price is still 180% more expensive.
The first graph below compares the average nominal price of electricity and inflation prices over the course of 1994 to 2020.
It shows a steep incline in both the nominal and inflation-adjusted electricity price from 2007 onwards.
The bar chart below stacks the annual increase percentages against inflation in the same year.
The blue represents inflation, while the red is Eskom’s price increase by percentage.