No, you don’t pay too much for electricity – Eskom CEO

Eskom CEO Andre de Ruyter has cleared up misconceptions around the price of electricity in South Africa.

Speaking during his keynote address at the Joburg Indaba, De Ruyter addressed a popular narrative regarding the electricity price in South Africa.

Many South Africans complain that they pay too much for electricity, but it is more likely that the opposite is true, according to a number of studies cited by the state power utility’s CEO.

“In terms of electricity pricing, South Africa’s commercial and industrial electricity tariffs are competitive by international standards,” De Ruyter said.

“In a study undertaken by Statista in 2018, results indicated that Eskom’s and even South African (including municipalities) average electricity prices are relatively low, when compared to other countries in the world.”

“In a recent 2020 report by NOVA Economics, a comparison across 100 countries showed that South Africa’s average price ranked competitively across all three of the main customer segments – industrial, commercial, and residential,” he said.

De Ruyter said South African residential consumers pay an average of 133.67 c/kWh, which is a lower tariff than more than half of the countries surveyed in these studies.

South Africa’s average commercial tariff of 122,96 c/kWh is cheaper than 71 of the 100 countries surveyed, while industrial tariffs are among the lowest 20 countries surveyed, at 76,32 c/kWh.

Cost-reflective electricity prices

South Africa’s electricity prices are the third-lowest in sub-Saharan Africa, De Ruyter said, which does not reflect the cost of production.

“Compared to other utilities in the sub-Saharan region, Eskom’s electricity price is relatively low,” he said. “The current average selling price is R1,02/kWh, and this is below the levels required to be cost-reflective.”

The average price of electricity is approximately 133 c/kWh for all customers in 2020, while Eskom’s average is only 102 c/kWh.

“This represents a R67-billion revenue shortfall for the 2020 financial year and over R300 billion in revenue shortfall over the last 10 years,” De Ruyter said.

“This situation does not augur well for the sustainability of Eskom.”

He also noted that backup power is more expensive to produce than grid power and that the cost of unreliable energy is much higher than appropriately priced electricity.

“Through our collective abilities, we remain resolute to achieve operational and financial sustainability to regain Eskom’s reputation as South Africa’s trusted and credible electricity supplier,” De Ruyter said.

Price increases on the cards

De Ruyter’s statements follow after Nersa was granted leave to appeal the decision of the High Court regarding the timing of Eskom’s recuperation of R69 billion in misappropriated equity.

Nersa previously submitted that it had wrongfully deducted the amount as revenue as part of its multi-year price determination (MYPD) methodology.

Eskom wanted to recover part of this money, in addition to other costs, through electricity price increases of 16.6% and 16.7% in 2020/21 and 2021/22.

Nersa, however, only granted Eskom price increases of 9.41% and 8.10% in 2020/21 and 2021/22 respectively.

This latest decision means that the period of three years over which Eskom will be allowed to recover the money could be scrutinised.

Should the court decide that the money can be recouped over a longer period, it could mean that annual electricity price increases would be lower than anticipated.

Either way, price increases are coming – although you may still end up paying less than many other countries in sub-Saharan Africa.

Now read: Court case over Eskom price increases heats up

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No, you don’t pay too much for electricity – Eskom CEO