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 R22.8bn adjustment for the 2013/2014 financial year. This is one of many exorbitant tariff increases forecasted until 2022 and onwards when electricity price increases are expected to match up with Consumer Price Index (CPI) - according to the latest energy forecast conducted by Energy Partners, a leading energy solutions provider in South Africa.
Mila Loubser, Head of Energy Reporting at Energy Partners, points out that the historical impact on actual domestic tariffs for a typical consumer in residential areas will have increased from R 0.14 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 says 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 adds that the forecast was based on Eskom’s 2015 submission of an application for price increase of 25.3% as a selective reopener of 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 R200bn 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, says 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. Energy Partners have decreased the consumption of our top ten clients on average by 23% and saved more than R1.5bn in a five-year period, simply by implementing energy management programs.”
She explains that these energy management programs can be implemented quite effortlessly if the consumer partners with an expert. “Once these programs are running, further opportunities for saving and optimisation like solar power generation and efficient water heating are constantly identified and executed to further increase overall savings substantially.”
Loubser stresses the importance for energy users to consult with an energy solutions provider that has access to a sophisticated tariff calculation engine. “These calculators can simulate different scenarios of consumption during different periods of the day. This process enables the organisation to identify energy intensive processes and machinery and also sheds light on their tariff system. 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, especially in light of the significant savings these initiatives can yield by using only the existing energy infrastructure,” concludes Loubser.