The middle class is still bearing the brunt of Eskom’s pricing structure, but industries will also feel the pinch.
Neighbouring countries appear to be the only Eskom customers who aren’t reeling. They pay far less for electricity than even industry and have a different set of regulations for deciding on increases.
On June 25 the National Energy Regulator of South Africa (Nersa) approved a 31.3% average price increase for Eskom. According to Nersa, this will result in an average standard tariff increase from 25.24c/kWh (cents per kilowatt hour) to 33.14c/kWh.
Tariffs on Eskom’s poorest customers have been capped at 15%. These customers, who use about 100kWh of electricity each month, make up the majority of Eskom’s 4.5-million customers. Many of them are eligible for the 50kWh of free electricity supplied by government. Because of the capping, Eskom’s other customers will have to pick up the slack and will see an average 33.6% increase.
“Your [residential] bill depends on how much electricity you use and on your profile,” said Eskom’s senior manager for energy pricing, Deon Conradie. “You’ll roughly see an increase of between 27% and 33%.” Industries will see an increase of between 25% and 33% depending on whether they operate during high or low season.
The increase includes government’s 2c/kWh environmental levy. According to Conradie, the levy works out to an average 8% increase in the tariffs, which has been included in the overall tariff hike. The average residential user now pays an energy charge of 57.46c/kWh in addition to the service charge, network charge and environmental levy. By contrast, the standard active energy charge for industrial users is 19.9c/kWh in the low season and 30.25c/kWh in the high season. In both cases industry pays far less for electricity than residential users.
Economist Mike Schussler said this gap in price between residential and industrial energy users is one of the biggest in the world. “In America suppliers give a 40% discount to industrial customers. We’ve given them a 61% discount on prices. Our households are carrying the burden,” he said.
According to Conradie a number of factors contribute to this. “We supply all the rural people,” he said, “and the cost to supply them is very high.” Because the recipients of such projects are usually low-use customers, that cost is spread across the rest of Eskom’s clients.
Professor Kevin Bennett, director of the Energy Research Centre at the University of Cape Town, said that from government’s point of view low energy costs for industries will encourage economic growth. “If you give industry a high price, they’ll simply pass it on to the consumer. Industry is certainly not going to carry the cost.”
But Schussler said only some industries, for example the motor industry, would be able to do so. “The increase in electricity price is bad for residents and industries,” he said.
For Schussler, a larger problem is the prices Eskom charges to neighbouring countries, which are allegedly one-third of what consumers pay.
In an email Eskom said: “Eskom has long-term agreements with some industrial end-users, which provide for the provision of firm power.
Eskom initiated an export pricing policy with Nersa during 2006 with a view to migrating export pricing to reflect the marginal cost of generation.
This migration is ongoing.” Eskom said it could not provide specific rates for foreign electricity sales because of confidentiality.