Eskom Tariff Rates – Past, Present & Future

This festive season, the sight of all those brightly lit Christmas trees might make our hearts skip a beat for all the wrong reasons as we brace ourselves for the possibility of a hefty Eskom tariff hike in the coming year. Eskom’s proposed tariff increase of 16% annually between 2013 and 2018 could see the nation paying more than double the current rate per kilowatt in the next five years. The existing rate of around R1.2 per kW is already a point of contention among domestic users and small commercial users – and should NERSA approve Eskom’s application, the cost of electricity will soar. No wonder so many South Africans are feeling somewhat “Scrooged” by Eskom this Christmas season. On that note, let’s take a look at Eskom’s “three ghosts of Christmas” – tariff rates of the past, the present, and of course, those yet to come…

The Past

Eskom’s first Multi-Year Price Determination cycle, MYPD1, became effective in 2007 and was followed by MYPD2 in 2010. Since then, energy costs have been steadily rising and they show no signs of slowing. Eskom’s history of subsidising the energy costs of large commercial clients could well create even greater challenges for small businesses, as the energy giant tries to recover these costs in the next cycle.

The Present

The current Multi-Year Price Determination – MYPD2 – is set to end on 31 March next year. According to Eskom, MYPD3 is about “investing in the future”, and will help the energy giant to fund upgrades, refurbishments and new building programmes. MYPD3 will differ from its predecessors as it will span a five-year period instead of three years. The proposal has met strong opposition from COSATU and numerous other organisations.

The Future

From March 2013, Eskom proposes the following increases in charges for electricity use:
  • Industrial and commercial users – 21%
  • High-consumption domestic users – 14%
  • Municipalities – 13%
  • Low-consumption domestic users – 5%
So, if your household electricity bill currently stands at R500 a month (R6000 a year) and that increases by 14% annually, you’ll be paying the following over the next few years:
  • 2013 – R570 a month (R6840 a year)
  • 2014 – R649.8 a month (R7797.6 a year)
  • 2015 – R740.77 a month (R8889.26 a year)
Should these increases be implemented, those most heavily affected will be small business owners and domestic users across the country. Large-scale industrial and commercial users will be better equipped to deal with rising costs as their turnover is far higher than that of the average SME. In short, while Eskom says MYPD3 is designed to grow the economy, the rising cost of electricity could be a deterrent to South Africa’s aspiring entrepreneurs, and young adults looking to rent or buy their first home. Bah, humbug indeed. NERSA will announce its final decision on MYPD3 in February, and regardless of whether Eskom’s proposed figures are approved, there’s never been a better time for us as South Africans to prepare ourselves for the effects of rising electricity costs. Investing in energy-saving products now will help to keep costs down in the future, so you don’t find yourself exclaiming “What the Dickens” with the arrival of next year’s holiday season energy bill!