Eskom’s electricity tariffs have increased by around 450% since the start of load shedding in 2008This is according to an economic bulletin published by the South African Reserve Bank – written by economists Zaakirah Ismail and Christopher Wood.
Eskom makes a tariff application based on the Multi-Year Price Determination methodology, which bases prices on an allowable revenue that Eskom can earn to cover costs and expected energy sales for the period. As a result, the report showed that most tariff price increases occurred after 2007, coinciding with the onset of the first wave of load-shedding before skyrocketing as Eskom faced the costs of addressing its neglected and collapsing power plants.
As a result of this excessive price escalation over the last 15 years, the report further showed that South African households pay more than those in most African, Southeast Asian, and BRIC countries – with the exceptions being Rwanda, Kenya, Uganda, Hong Kong, Singapore, the Philippines, and Brazil.
According to the report, despite these higher prices, Eskom has not generated enough productive capacity to meet demand.a ‘utility death spiral’ is a real risk“This death spiral occurs when declining demand, and therefore, sales, means that tariffs need to increase to cover the costs of maintaining and expanding the grid, which in turn reduces demand even further as customers substitute alternative electricity sources or find themselves unable to pay,” it said.