2022 update: Eskom tariff increases vs inflation since 1988 (with projections to 2024)

01Aug
by Sean Moolman  
1

In 2015, 2017 and 2019 we published infographics showing Eskom annual tariff increases since 1988 compared to inflation.

Following Eskom’s court order success against NERSA in early 2021, it increased electricity prices by an average of 15.63% in April 2021. In April 2022, a further increase of 9.61% was approved. So what do the numbers look like today?

The graph below shows the Eskom tariffs from 1988 to 2022, plotted against CPI (Consumer Price Index) or inflation over the same period. It also shows projections up to 2024, based on expert forecasts and inflation projections.

Note: The graph depicts overall average increases – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

Looking at the graph, the following can be noted:

  • In the period from 1988 up to the 2008 electricity crisis, electricity tariff increases did not keep tread with inflation. This was partly due to government policy to keep electricity tariffs as low as possible for poor communities, but also due to Eskom having an oversupply of electricity (in the 1990’s) and not investing in new capacity (in the 2000’s).
  • Between 1988 and 2007, electricity tariffs increased by 223%, whilst inflation over this period was 335%.
  • From the 2008 electricity crisis onwards, there is a clear and sharp inflection point for electricity tariffs in South Africa. From 2007 to 2022, electricity tariffs increased by 653%, whilst inflation over this period was 129%. Thus, electricity tariffs increased four-fold (or quadrupled) in real money terms in 14 years.

Considering the current serious state of Eskom’s debt and the fact that the country probably cannot afford for Eskom to fail, consumers can likely expect a continuance of much higher than inflation electricity price increases over the next several years.

In fact, Eskom has already applied to NERSA for a 32% tariff increase in April 2023. It has also applied to NERSA to restructure residential tariffs to ‘reflect cost drivers more accurately’. The restructured tariffs will see two main options for direct Eskom customers – Homepower and Homeflex. 

For the Homepower tariff, the grid connection fee would increase from R218/month to R938/month – this is the charge before you have used a single kWh of electricity!

The Homeflex tariff will introduce time-of-use charges – in other words, the price of electricity will change depending on the time of day. (Time-of-use charges is widespread internationally, and helps to balance grid load by incentivising electricity use outside of peak hours.)

Eskom is in serious need of restructuring – which the government at last acknowledged and announced in 2019. As of October 2022 this restructuring has not yet been completed, but is in progress.

Sources:

  1. Eskom warned its pricing itself out of the market. Website: https://techcentral.co.za/eskom-warned-its-pricing-itself-out-of-the-market/105167/. Last accessed: 2021/07/30.
  2. Eskom tariffs and charges. Website: https://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariffs_And_Charges.aspx. Last accessed: 2022/10/20.
  3. Stats SA. CPI History. Website: http://www.statssa.gov.za/publications/P0141/CPIHistory.pdf?.  Last accessed: 2019/10/01.
  4. Bureau for Economic Research. Inflation Expectations – History (2021). Website: https://www.ber.ac.za/BER%20Documents/Inflation-Expectations/?doctypeid=1065. Last accessed: 2021/07/30.
  5. South Africa Inflation Expectations. Website: https://tradingeconomics.com/south-africa/inflation-expectations. Last accessed: 2022/10/20.

Image of Lethabo power station by Simisa on Wikimedia Commons [CC BY-SA 3.0]