Electricity prices rising faster than inflation, says Ramokgopa

Electricity prices have increased by about 907% since 2007, far outpacing inflation, electricity and energy minister Kgosientsho Ramokgopa says.

He was speaking at a media briefing on the revised electricity pricing policy in Pretoria on Tuesday.

Ramokgopa said inflation had risen by about 150% over the same period, highlighting the growing pressure electricity costs are placing on households and businesses.

“It’s important that we address the cost of electricity,” he said.

Ramokgopa said South Africa had not reviewed its electricity pricing policy since 2008, despite major changes in the electricity sector and the way people use electricity.

He said household consumption patterns had changed significantly, including among poorer households.

“Like people living in informal settlements, for example, now often use fridges, cellphones, laptops and electric kettles, creating greater demand for electricity,” Ramokgopa said.

The revised policy proposes increasing the amount of free basic electricity available to qualifying households from the current 50kWh to between 200kWh and 300kWh.

Officials said the increase would be funded within the existing allocation and would not require additional money.

Ramokgopa said the current system had leakages, with money intended to support poor households sometimes being redirected to other municipal expenses.

“We want to improve the way the subsidy reaches qualifying households, including through a digital platform and better management of indigent registers,” he said.

A consumer can be burdened by bad decisions that are made, either at Eskom or at municipality

—  Kgosientsho Ramokgopa, electricity and energy minister

The minister said the policy would also make electricity bills more transparent by separating the different costs involved in supplying electricity.

“We separate from the conversion of coal to electricity. We separate it from the cost of transmission. We separate it from the cost of administering,” he said.

The policy will also move tariffs towards cost-reflective pricing over a five-year period, while retaining free basic electricity and lifeline tariffs for poor and vulnerable households.

Ramokgopa said electricity tariffs should no longer be used to cover inefficiencies at Eskom or municipalities.

“A consumer can be burdened by bad decisions that are made, either at Eskom or at municipality.”

He said municipalities would have to justify their electricity costs through proper cost-of-supply studies.

Eskom is no more that monopoly that we have come to understand

The policy also proposes measures to reduce unfair differences in electricity charges between municipalities and customer groups.

Ramokgopa said the electricity market was changing as government reforms allowed more private producers and new generators to enter the market.

“Eskom is no more that monopoly that we have come to understand,” he said.

The revised policy also proposes a long-term electricity price path to give households and businesses greater certainty.

“You are not allowed to punish those who are paying, for those who are not paying.”

Ramokgopa said the aim was to eventually provide a 10-year plan on electricity prices, though this would not happen immediately.

It could take another 12 to 18 months for the regulator to determine the price path, he said.

Ramokgopa said greater certainty would help companies, particularly in the energy industries, make investment and expansion decisions.

He also said the era of double-digit electricity tariff increases should be over.

The policy will also allow households with rooftop solar systems to export excess electricity and receive credits through billing arrangements.

The credit would be reflected on the customer’s account rather than necessarily involving a direct cash payment.

The minister added that efforts to end load reduction in townships, villages and informal settlements were also in place.

Load reduction had been eliminated in seven of the nine provinces, with Gauteng and KwaZulu-Natal the two provinces where work was continuing.

He added that the policy, which has been approved by the cabinet, will now be published for public comment.

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