South Africa’s electricity tariffs are like petrol prices — loaded with taxes

A large part of South Africa’s electricity prices is consists of government levies and costs that are out of Eskom’s control.

South Africa’s electricity tariffs are like petrol prices — loaded with taxes

That is according to independent regulatory and tariff consultant Deon Conradie, who told Sunday newspaper Rapport that the electricity tariff is used much like petrol prices in the country.

Like the general fuel levy, the electricity price is loaded with fees that the government uses for other purposes.

Conradie’s comments come after Eskom confirmed it was seeking a 20.5% electricity price increase for the 2022/2023 financial year.

Conradie explained that the price determination process did not adequately consider that Eskom had no control over costs such as the growing amount Eskom is paying for electricity from independent power producers, an environmental levy, and coal taxes.

It currently costs Eskom about 95 cents to produce a kWh of electricity. In the next financial year, it will be paying an average of 206 cents per kWh to private power producers.

This cost is expected to come down over the next few years, which is why the subsequent increases Eskom is asking for in 2023/2024 and 2024/2025 are 15.07% and 10%.

Eskom has said despite the increases, it will still have a shortfall of R29 billion.

Professor Anton Eberhard of the University of Cape Town’s FutureLabs said that Eskom would have to increase prices by 70-80% to measure up to its capital costs.

The average price of electricity in South Africa has swelled by over 582% since the first time load-shedding was implemented in 2007.

In that year, consumers paid an average of 19.59 cents per kWh, compared to the roughly R1.34 Eskom is charging now.

2021 has been the worst year for load-shedding on record, and Eskom’s expenditure on diesel for running its emergency generation is expected to go well over its budget.

These unexpected costs can contribute significantly to Eskom’s price adjustments.

Despite the significant increases over the past 14 years, South Africa has the eighth-cheapest electricity in Sub-Saharan Africa and the 48th cheapest globally, according to researchers at Cable.co.uk.

“Sub-Saharan Africa has four of the top ten cheapest countries in the world and three of the top ten most expensive,” the researchers said.

Countries in the region with cheaper power than South Africa include Tanzania, Zambia, Ethiopia, Guinea, Zimbabwe, Sudan, and Angola.

Angola is the cheapest in the region and second-cheapest globally, at an average price of R0.21 per kWh.

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