Eskom is set to increase its electricity tariffs in South Africa following a recent judgement by the North Gauteng High Court.
This ruling 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 this amount over a three-year period.
The power utility confirmed to MyBroadband that this ruling meant it could proceed with price increases.
It said the average price of electricity at the moment is significantly lower than what it costs to efficiently produce the electricity.
This results in the taxpayer subsiding Eskom’s continued losses instead of paying enough to cover the cost of producing power.
Eskom said that it expects to increase electricity tariffs in South Africa by 10% as a result of this ruling, with the changes coming into effect for the 2021/2022 financial year.
Many South Africans may be despondent to learn that electricity prices will continue to increase, and at rates even higher than expected, but Eskom actually has reasonable grounds to continue with these increases.
Historical price increases
For the greater part of its history, Eskom has been among the most successful power producers in the world.
The power utility was established in 1923 and had become so successful by 1990 that it was supplying more than half of Africa with electricity.
Over this time, Eskom had become highly efficient, and its prices remained below inflation for an extended period of time.
This is reflected in tariff history documents published by Eskom that detail the historical tariff trends from 1973 until 2000.
Eskom maintains that its balance sheet and the taxpayer have been providing a subsidy to the electricity consumer for many years.
This is readily apparent when looking at historical Eskom tariffs, which show that price increases were below inflation for many years – especially over the period when Eskom’s efficiency was relatively high.
Using historical tariff booklets published by Eskom, we compared the energy rate in cents per kilowatt-hour (c/kWh) for its residential HomePower tariff.
We compared the energy rate paid by households that consumed 300kWh in a single month.
It should be noted that while there has been a substantial increase in the amount charged for electricity over the past few years, Eskom’s prices have remained relatively low since the mid-1900s.
For this reason, South Africa’s electricity prices remain significantly cheaper than those of most other countries.
Graphs showing Eskom’s tariff increases, inflation, and electricity prices in South Africa versus the rest of the world are shown below.
Click on the graphs below to expand them.
Historical tariff increases vs Consumer Price Index