Electricity prices forecast to surge by 93% in eight years

The power situation in South Africa will only fully stabilise by 2022 when a reliable energy supply and standard increases can be expected to be established once more‚ says energy specialist Mila Loubser. Until then‚ she says South Africans should brace for exorbitant price hikes.

All cities in South Africa will face an electricity tariff increase of at least 16% in July if Eskom is granted approval to cover a R22.8-billion adjustment for the 2013/2014 financial year.

Loubser‚ Head of Energy Reporting at Energy Partners‚ calculates that the historical impact on actual domestic tariffs for a typical consumer in residential areas will have increased from R0.14 per kWh in 1988 to R2.18 per kWh in 2016 if this latest increase application is approved.

“Our forecast further predicts that the electricity cost for the average South African household will increase from R13‚509 per annum to R15‚696 in one year’s time‚ R25‚206 in five years’ time and R30‚360 in eight years’ time.

“This will mean a cumulative increase by 93% over an eight year period.”

Loubser said in a statement that an annual increase of around 13% is expected up until 2019 after which increases are expected to drop to 8% per annum.

“Our data suggests that the power situation in South Africa will only fully stabilise by 2022 when a reliable energy supply and standard increases can be expected to be established once more.”

She said the forecast was based on Eskom’s 2015 submission of an application for price increase of 25.3% as a selective reopener of the electricity regulator NERSA’s third multi-year price determination (MYPD 3). “This application was rejected in June 2015 due to significantly overstated costs and a lack of credible long-term planning and certainty. In light of this rejection‚ Eskom will have to borrow funds in order to close the funding gap of R200-billion up to 2018.”

Due to current circumstances and difficult environment for the industrial‚ commercial and residential sectors‚ it is vital to implement smart energy usage‚ said Loubser.

“A first step for businesses and households is the development of an energy management strategy to decrease consumption and lower the base that is used for multiplication with new increased tariffs... A simple example of effective load management is to run energy intensive machinery during off-peak times when a lower tariff rate is charged.”

“With a cumulative increase of 93% expected over the next eight years‚ no organisation or household can really afford not to monitor their energy usage‚” she said.