Eskom is shifting goalposts in electricity pricing

CATEGORY: Research Use and Impact Assessment
DATE: 30 January 2013
AUTHOR: Miriam Altman

Dr Miriam Altman

Eskom has proposed price increases in its application to  the multi-year price determination (MYPD3) process that would raise the real electricity price by 3 to 4 times over the decade from 2008-2018.  Dr Miriam Altman, prominent economist and distinguished research fellow at the HSRC, has submitted a response to that application, voicing her concern that in each application since 2008, Eskom has shifted the goal posts.

“The electricity price needs to become more cost-reflective to enable future investment. Yet, the costs represented in its current application far exceed those in its last application,” Altman says.

The report argues that Eskom could achieve its financial goals, albeit over an extended period. Altman proposes that a target price for 2018 be set based on Eskom’s last application, and that an approach be found to ensure this does not undermine Eskom.  This would result in a nominal increase of 10% to 12% pa, instead of the 16%-20% per annum proposed by Eskom.

Altman is also concerned that municipalities have escalated their prices well above those proposed by NERSA, often at double the rate given to Eskom. “This especially affects small - and medium-sized firms. While there are policies to buffer the poor with free basic electricity and reduced rates, this report finds that many municipalities were not doing so. Continued uncertainty in energy policy and pricing could dramatically reduce potential growth and job creation.”

She said that while industry must adjust to a new energy saving reality, it is unlikely that they can get to the sort of savings needed to maintain their cost competitiveness over this short period. The pace of achieving financial sustainability in Eskom must be weighed against the competitiveness of the South African economy given its reliance on metals and minerals, which provide half of all exports and many jobs directly and in industries that depend on them.

Download and read Dr Altman's response as well as the other supporting documents:

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Ina van der Linde, Science Communication, HSRC: tel: +27(0)12 302 2024 / cell phone:  +27(0)823310614 / e-mail: ivdlinde@hsrc.ac.za