Electricity price up 907% as minister admits industry pain
· Citizen
The price of electricity has gone up by a staggering 907% in the past 20 years – more than six times the increase in inflation, admits Minister of Electricity and Energy Kgosientsho Ramokgopa.
Outside countries caught up in wars or with economies collapsing because of hyperinflation, this is the highest increase globally in a country with a stable regulatory system.
Visit newsbetting.club for more information.
Tariffs increase by 19% from 2007 to over R3.70/kWh
Tariffs escalated from roughly 19 cents/kWh in 2007 to over R3.70/kWh, driven by National Energy Regulator of South Africa (Nersa) approvals, corruption, debt and the costs of uncompleted megaprojects like Medupi and Kusile power stations.
Addressing journalists on the government’s new electricity pricing policy, which will be released for public comment on Friday, Ramokgopa confirmed official inflation stood at just over 150% for the same two-decade period.
He acknowledged that the cost of electricity was “undermining the competitiveness of our industries and “eroding disposable household income”.
He noted that household expenditure accounted for 60% of South Africa’s economy.
Earlier this year, Eskom announced it would be implementing the recommendations of Nersa, which approved an average direct Eskom electricity price increase of 8.76% for the 2026- 27 financial year, followed by an expected 8.83% for 2027-28. Municipal distributors are implementing matching average increases of around 9%.
Minister promised new power pricing policy
However, the minister promised the new power pricing policy would bring major changes to the current system and would be more transparent and fair.
While the pricing structures would aim to allow industries heavily dependent on electricity to remain globally competitive, there would also be strengthened “social protections” and support would be provided to the “indigent, the poor and the vulnerable”.
As part of that support, Ramokgopa said he envisioned the amount of free electricity provided to poor households rising from the current 50kWh per month to 200kWh or even 300kWh.
That would accompany plans to “eliminate” what he called “cross-subsidisation” in municipalities, where those in the more affluent areas are charged more than those in the poorer areas.
He spoke about those who pay their bills “religiously on a monthly basis” being “burdened by other delinquent payers”.
People who pay bills religiously ‘burdened’ by non-payers
He added: “I’m not talking about the indigent. I am talking about those in a position to be paying who ought to be paying and they are not paying.”
These defaults lead to increases in municipal debt and in Eskom debt, because municipalities cannot pay Eskom. The current tariff structures allow Eskom to recover some of that by adding to what it charges. “This puts additional pressure on diligent consumers.”
In terms of the proposed new tariff policy, this would not be allowed, Ramokgopa said. “You are not allowed to punish those who are paying on account of those who are not paying.”
Another area which had to be tackled, the minister said, was technical losses. Failure to maintain infrastructure was partly responsible, but just as critical was the fact that people had connected themselves illegally.
In some cases, these technical and non-technical losses of electricity could be as much as 30% of the amount bought from Eskom.
Technical and non-technical losses 30%
He said Nersa will have to publish a 10-year price forecast.
“This is important because, for heavy industries, when people want to make significant investments in the SA economy, and it’s in a sector that relies on electricity, they want to compute the return on investment. If electricity is a big part of the input cost, you need to have an appreciation of what the price path looks like.”
“We’re also introducing another criterion. This could be industries not in distress, but if they were to get concessional funding, they’re able to accelerate growth in the priority sectors of the economy; they’ll create employment. We’re using it as a pre-emptive strike to rejuvenate the economy,” he said.
AfriForum local government affairs manager Morné Mostert said the policy will be worth little more than the paper it is written on if Nersa continues to fail to properly enforce electricity legislation and licence conditions.
“For too long, municipalities have been allowed to disregard regulatory requirements, while consumers continue paying ever-higher tariffs. It is time for proper consequence management. Licensees that repeatedly fail to comply with the regulatory framework should face enforcement action.”