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Eskom CEO Andre de Ruyter has cleared up misconceptions about the price of electricity in South Africa.
During his keynote speech at Joburg Indaba, De Ruyter addressed a popular narrative about the price of electricity in South Africa.
Many South Africans complain they pay too much for electricity, but the opposite is more likely, according to a series of studies cited by the CEO of the state energy company.
“In terms of electricity prices, South Africa’s commercial and industrial electricity rates are competitive by international standards,” said De Ruyter.
“In a study conducted by Statista in 2018, the results indicated that the average electricity prices of Eskom and even South Africa (including municipalities) are relatively low, compared to other countries in the world.”
“In a recent 2020 report from NOVA Economics, a comparison across 100 countries showed that South Africa’s average price ranked competitively across the top three customer segments: industrial, commercial and residential,” he said.
De Ruyter said that South African residential consumers pay an average of 133.67 c / kWh, which is a lower rate than more than half of the countries surveyed in these studies.
South Africa’s average commercial rate of 122.96 c / kWh is cheaper than 71 of the 100 countries surveyed, while industrial rates are among the lowest 20 countries surveyed, at 76.32 c / kWh.
Electricity prices reflecting costs
South Africa’s electricity prices are the third lowest in sub-Saharan Africa, De Ruyter said, not reflecting 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 reflect costs.”
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 revenue shortfall of R67 billion for fiscal year 2020 and more than R300 billion in deficit revenue in the last 10 years,” said De Ruyter.
“This situation does not bode well for Eskom’s sustainability.”
He also noted that backup power is more expensive to produce than grid power and that the cost of unreliable power is much higher than that of properly priced electricity.
“Through our collective skills, we remain determined to achieve operational and financial sustainability to regain Eskom’s reputation as South Africa’s reliable and credible electricity supplier,” said De Ruyter.
Price increase on cards
De Ruyter’s statements follow after Nersa left granted leave to appeal the High Court decision regarding the timing of Eskom’s recovery of R69 billion in misappropriated actions.
Nersa previously claimed that it had improperly deducted the amount as income as part of its multi-year pricing methodology (MYPD).
Eskom wanted to recoup 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 last decision means that the three-year period during which Eskom will be able to recover the money could be analyzed.
If the court decides that the money can be recovered over a longer period, it could mean that the annual increases in the price of electricity would be lower than expected.
Either way, price increases are coming, although you may end up paying less than many other sub-Saharan African countries.
Now Read: Eskom Price Increase Court Case Heats Up
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