Eskom electricity prices have skyrocketed — and it’s only going to get worse
Average electricity prices in South Africa have surged by over 582% since load-shedding was first implemented in 2007.
Last year saw Eskom implement the greatest amount of load-shedding in 14 years. The utility also slapped an average increase of 15.06% on tariffs for the 2020/2021 financial year.
This was the biggest increase in electricity prices in the last eight years.
A large part of this increase was because Eskom won a series of court battles with the National Energy Regulator of South Africa (Nersa), allowing it to recoup more for unexpected costs to produce electricity.
Eskom is expected to collect more money for unexpected costs through price increases in the coming years.
One of the big drivers of these unexpected costs is spending on diesel used to operate open-cycle gas turbines (OCGTs) that can provide emergency generation during peak usage periods.
There is further bad news on this front, as the recent explosion of the Medupi Unit 4 generator has increased Eskom’s reliance on OCGTs.
With the unit’s replacement expected to take two years, Eskom will likely have to spend more on diesel than it had anticipated, a cost which may get passed down to the consumer.
In addition, the loss of this unit has pulled 794MW of capacity from the grid, increasing the risk of load-shedding.
South Africans had among the lowest electricity fees in the world during the first decade of the country’s democracy.
Eskom charged between 10 cents and 16 cents per kWh from 1994 to 2003.
From 1994 to 1999, annual price increases never exceeded the annual inflation rate, effectively meaning that electricity prices were actually dropping.
Between 2000 and 2003, prices remained fairly flat, while 2004 even saw a small decrease.
The situation took a turn for the worse after load-shedding was first implemented in 2007.
Government failed to act on warnings from energy experts that Eskom was running out of capacity to serve a growing population of people getting connected to the grid.
Prices skyrocketed between 2008 and 2012, with average annual increases ranging from 16.53% to 27.75%.
This increased electricity prices from 24.97c/kWh to 58.49c/kWh in four years.
Since that time, the average price increases have also consistently remained above the rate of inflation.
The table below shows Eskom’s average electricity prices, increases, and South Africa’s inflation rate from 1994 to 2021.
|Eskom electricity tariffs 2007-2021 (excludes VAT)|
|Year||Average (c/kWh)||Average price increase||Inflation||Inflation-adjusted price (c/kWh)|
*Inflation at the time of publication.
After the price increase for the 2021/2022 financial year, electricity prices are now nearly 7 times as expensive as in 2007.
When taking inflation into account, it is still three times more expensive.
The graph and chart below show the actual electricity prices in South Africa compared to inflation-adjusted prices, and the relationship between the price increases and South Africa’s inflation rates since 2007.
Electricity prices in South Africa