South African Electricity Price Projections

Often one has to dig deep in order to find the important information in the media. Yesterday’s article in the Engineering News titled “Eskom says can find cash for power stations” had a few lines of very important information mid way into the article.

Eskom’s new Chief Financial Officer Paul O’Flaherty is quoted as saying that ” …Eskom was working under the assumption that tariffs would rise by a further 25 percent in the fourth and fifth year as well”.

The importance of this cannot be over estimated for a few reasons. Firstly, compounding increases of 25% for five years in a row will almost triple the cost of electricity in South Africa. This is a big knock for a country that once upon a time assumed that electricity was free. Secondly, this statement by a highly respected insider within the utility offers a level of certainty to investors with regards to the energy prices in South Africa, something that is sorely lacking and that is probably one of the biggest drags on investment into the energy efficiency and renewable energy sector in South Africa. Thirdly, corporate South Africa is only now waking up to the reality of sky rocketing electricity prices. The party is over!

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