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  • Dale Rouessart

Global Energy Prices and where South Africa fits into the mix

With Global Energy prices currently soaring, and with Eskom’s proposed 20.5 % price hike to possibly take effect on 1 April 2022, we though it appropriate to have a look and see where South Africa’s electricity prices fit into the global equation.

Do you know what you are paying? We can make sure that what you are paying is correct and fair!

In the map, these figures are averages so you might be paying more with all the network access charges and demand charges levied. That’s where we come in to check and double check…

  • Blue areas are the cheapest zones at less than R1.52 – R2.88 per kWh. South Africa is in this zone, but we all know that with the taxes and hidden costs from our government taxes and extra charges, the rate for South Africa is probably a bit higher.

  • The Purple zones are the next more expensive at R2.88 - R4.39 per kWh.

  • Pink being the most expensive at greater than R10.45 per kWh. These are remote areas like islands.

  • Grey are some countries or territories where either minimal electricity provision exists, there exists only very basic infrastructure, or the information simply isn't available. And there are countries and regions where problems with the currency do not allow for useful comparison.

At the time of this publication (June 2021), South Africa was in the Blue Zone but with the 20.5% increase we will be at upper range of the Purple Zone.

Countries are colour-coded by the average price of one kilowatt hour (one kWh) of electricity. As you can see, this paints an interesting picture, with a lot of the countries where energy is cheapest in Northern Africa, Sub-Saharan Africa, and the former USSR, with some of the most expensive being in the Caribbean and the remote island nations of the Pacific Ocean.

So then we get to Eskom seeking a 20.5% electricity price increase for the 2022/2023 financial year.

While Eskom has applied for an electricity price increase of 20.5%, the actual jump in tariffs charged by the utility could be around 32.15%, according to calculations by the National Energy Regulator of South Africa (Nersa). These are the reasons

  • 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. 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. 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.

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

The regulator’s pro forma implementation plans on Eskom’s planned price increases that will take effect from 1 April 2022 have confused South Africans because it differs from the increases the utility has requested.

Eskom’s original price increase only considers the amounts it is entitled to claw back in terms of the Regulatory Clearing Account (RCA).

On that basis, Eskom’s total allowable revenue from its standard customers for the 2022/2023 financial year would amount to R261.9 billion.

That means that the average standard tariff would increase from about R1.34 to R1.61 per kWh — a 20.5% jump.

While this would already be one of the biggest increases in recent years, Nersa’s calculations paint an even grimmer picture.

Global Energy prices are booming now as Utilities are becoming scarcer. First World countries are experiencing record prices for Electricity and Gas. Water will be next. South Africa will be next. Will this inflate the price even more in South Africa?

It is so important to monitor your usages to avoid wasted costed. You will also have a peace of mind that Archon is looking after your Utilities and making sure you are not getting taken advantage of. It will also free up your administration department to do more important things that they understand.

We monitor the Utilities. That’s our Passion

You run your Business. That’s your Passion

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