Eskom’s 18.65% price hikes kick in

South Africa’s embattled state-owned power utility raises its tariffs today, increasing electricity prices by an average of 18.65%.

The National Energy Regulator of South Africa (Nersa) granted final approval for the increase two weeks ago, incorporating a last-minute change from Eskom.

Nersa revealed that Eskom submitted a revised application on 2 March 2023 with a lower increase for Homelight 20 Amp customers.

Electricity prices will only increase by 10% for these customers, which StandUpSA founder Khustaz Mtwentwe explained includes townships and rural areas.

The reduced increase for these customers is subsidised with a higher increase for key industrial and urban customers. They will see a 29.53% increase.

Eskom has clarified that these large industrial and urban customers exclude municipalities. Therefore, regular home users in towns and cities with municipal governments should not see increases above 18.65%.

In addition to the last-minute changes for Homelight 20A and non-municipal large industrial and urban customers, Nersa approved an 18.49% tariff increase for municipalities.

Nersa explained that municipalities would realise a lower increase than Eskom’s because of a mismatch between their financial years.

Eskom’s price increase kick in when its new financial year starts in April, but the municipalities may only increase their prices in July.

“In the first three months (April to June) of Eskom’s financial year, they will not experience an increase, as their financial year commences on 1 July every year,” Nersa explained.

“The municipalities cannot increase their tariffs in the middle of their financial year, as it would not correspond with the revenue to be achieved from licensed municipal distributors.”

Nersa noted that its approved tariffs exclude value-added tax, which the government currently has at 15%.

A recent Daily Investor analysis of South Africa’s electricity prices from 1950 to 2022 revealed that Eskom’s tariffs were aligned with inflation until 2008, when the country first experienced load-shedding.

After that, prices started to increase rapidly. However, it did not help the power utility to become more sustainable or prevent load-shedding.

In fact, Eskom deteriorated rapidly during the years of high price increases.

In 1994, Eskom’s average selling price for electricity was 10.32c per kWh. South Africa enjoyed cheap electricity, which did not prevent Eskom from achieving excellent results.

Eskom increased revenue by 11.8%, from R13.8 billion to R15.4 billion, and grew net income by 37.8%, from R1.6 billion to R2.3 billion.

By the turn of the century, Eskom was still profitable despite the selling price for electricity only rising slightly to 13.23c per kWh.

Eskom was so well run that it received the Power Company of the Year award in the Financial Times’ annual Global Energy Awards in 2001.

In 2008, Eskom’s average selling price for electricity was 19c per kilowatt-hour (kWh), the unit of energy used in South Africa for billing.

Over the next twelve years, it increased by 472% to 111c per kilowatt-hour (kWh). It was the most rapid price increase in history and far exceeded inflation.

Research on the price of electricity for households and businesses in 148 countries shows that South Africa ranks 86th — the more expensive side of the scale.

South Africa’s electricity prices are also higher than three BRICS countries – India, China, and Russia.

The table below summarises Nersa’s approved retail electricity tariff adjustments for the 2023/24 financial year.

Nersa-approved retail tariff adjustment 2023/24
Customer category Average increase
Total standard tariffs 18.65%
Municipal — 1 July 2023 18.49%
Eskom Direct customers
Key Industrial & Urban: Megaflex, Miniflex, Nighsave Urban, WEPS, Megaflex Gen
Other tariff charges 18.65%
Affordability Subsidy (paid by industrial and urban Eskom customers) 29.53%
Rural: Ruralflex, Nighsave Rural, Landrate, Landlight, Rurafex Gen 18.65%
Homelight 20A 10%
Block 1 (0–350kWh) 10%
Block 2 (>350kWh) 10%
Homelight 60A 18.65%
Homepower 18.65%

Now read: Insurance companies refusing to cover total Eskom grid collapse a good thing — ombud

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Eskom’s 18.65% price hikes kick in