The impact of rising electricity tariffs on tariffs on the urban poor : a South African case study

Master Thesis


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University of Cape Town

Historically, South Africans have benefited from relatively cheap electricity where tariffs have not been cost reflective and kept below inflation. Tariff structures have not fully accounted for the cost of investing in new infrastructure for generating, transmitting and finally distributing electricity to the end user. This has partly contributed to an inadequate and constrained electricity supply that is insufficient to meet the growing energy demand in South Africa e.g. the 2008 rolling blackouts (Tait 2011). Since 2004 the average electricity tariff has however increased above inflation to be able to invest in Eskom’s New Build Programme. The increases between 2008 and 2011 were particularly high, in the range of 16 – 22 in real terms. The National Electricity Regulator of South Africa approved an ‘above inflation’ annual average increase of 8 on the 1 April 2013 for Eskom customers and 1 July for municipal customers (NERSA 2013). The sectors however, do not experience the same degree of increase. This study aims to measure the increases experienced by urban poor households and determine the effect of the increases on their energy choices. It was initiated mainly to address concerns that Eskom’s tariff increases may affect the access and longterm affordability of electricity for the poor. Electricity is foundational to society’s ability to function well and without it essential services such as lighting, cooking and virtually anything electronic, will be negatively affected. Thus, any threat to service delivery on the side of the utility and affordability on the side of the customer should both be addressed by pro-poor policies. Eberhard and PDG (2010:2) made a compelling argument that if Eskom cannot extend their generation capacity, which is partly financed through a tariff, then this is not pro-poor. Increasing tariffs so that it is more cost reflective is essential to achieve the objective of meeting the growing electricity demand in the face of an ageing electricity network and a historically cheap electricity price. Tariff increases are inevitable. The real question therefore is how to balance the needs of the utility and the customer; the price of service delivery and the level of affordability, especially for the poor.

Includes bibliographical references