Analysis: Domestic electricity prices of six metros vs. Eskom

Public misperceptions have not been clarified or assisted by suggestions by the new acting Eskom CEO, Brian Molefe, that Eskom should take over the supply of electricity from all municipalities, and that all Eskom customers – domestic, commercial, industrial, agricultural and transportation – should then be put onto prepaid meter tariffs.

In response to these misperceptions, a first article compared Eskom single-phase domestic 20 A and 60 A prepaid meter tariffs with the utility’s single-phase domestic 60 A and 80 A credit meter tariffs, while a second article compared Eskom’s single-phase domestic prepaid and credit meter tariffs with those of City Power.

This third article is in response to several reader requests for a wider comparison of domestic electricity prices in South Africa, both between large municipal electricity distributors (to better understand the regional differences between the metros themselves), and between the metros and Eskom (which distributes electricity nationally in areas not previously served by municipalities).

Domestic electricity customers have no choice as to who supplies them with electricity, because all electricity distributors – Eskom and municipal – are geographic monopolies. It is therefore important that electricity pricing between distributors should be equitable, rational and non-discriminatory.

The reality, however, is that municipalities have different population sizes and densities, and provide different services – with different service levels and cost structures – to different mixes of low, medium and high income and usage domestic customers. In addition, municipalities have different mixes of domestic, commercial and industrial customers embedded within their geographic areas of supply.

Surpluses on the sale of electricity by municipalities also provide different levels of cross-subsidisation of other municipal services, depending on their income from municipal rates and taxes. There are also differing levels of cross-subsidisation between high, medium and low income customers, between large, medium and small customers, and between urban and rural customers.

All of this results in a wide variance of electricity tariff rates and structures between municipal electricity distributors, and with Eskom Distribution.

Furthermore, electricity prices are in a state of flux at this time. Eskom increased its prices by 12,69% on 1 April 2015, while municipalities increase their prices on 1 July each year. In addition, Eskom has since applied to NERSA for a further 12,61% increase in its 2015/16 prices (i.e. from 1 April 2015 to 31 March 2016). Whatever further Eskom price increase is finally determined by NERSA is likely only to become effective on 1 September 2015.

It is also not clear whether any additional price increase arising from Eskom’s application to NERSA will be backdated to 1 April 2015, or increased still further for the remaining months (from 1 September 2015 to 31 March 2016) of Eskom’s 2015/16 financial year. Nor is the impact and timing of any such increase of this further Eskom application on municipal electricity tariffs known at this stage.

Therefore it should be noted that the prices considered in this article are based on the current published tariffs applicable as at 25 May 2015, and readers should be aware of the uncertainties and changes that are likely to occur in the year ahead to 31 March 2016.

In this analysis, only 230 V single-phase tariffs have been considered, as these are in use by the significant majority of domestic customers. Three-phase domestic tariffs are only applicable to relatively few domestic customers, and seasonal and time-of-use tariffs have only recently been introduced, and are not in widespread use at all.

In order to compare the current domestic electricity pricing sensibly, the tariffs have been divided into two main categories, namely:

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  Limited-capacity (subsidised) domestic tariffs: generally with 20 A or 40 A prepayment meters, aimed at low income/usage domestic customers living in rural areas, shacks or townships. For all practical purposes, these supplies limit consumption to less than 1,000 kWh per month.

  
  


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  Standard domestic tariffs: generally with 60 or 80 A prepayment or credit meters, aimed at low, middle and high income/usage domestic customers living in detached or semi-detached houses in towns and cities.

  
  

In order to analyse and compare the prices resulting from the above standard domestic tariffs meaningfully, monthly electricity consumption is further subdivided into three ranges, namely:

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  Low-consumption: in the range from 0 – 1,000 kWh per month

  
  


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  Medium-consumption: in the range from 1,000 – 2,000 kWh per month

  
  


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  High-consumption: in the range from 2,000 – 4,000 kWh per month

  
  

The domestic tariffs and rates used in this article are as follows:

For ease of visualisation, the tariff rates of Tables 1 to 7 are translated into the graphs (below) showing:

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  Electricity price per month as a function of electricity consumption, for the limited-capacity single-phase domestic tariffs of the seven electricity distributors (Fig. 1).

  
  


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  Electricity price per month as a function of electricity consumption, for the standard single-phase domestic tariffs of the seven electricity distributors, in each of the three consumption ranges detailed above (Fig. 2.1, Fig. 2.2 and Fig. 2.3).

  
  

Fig 1: Limited capacity (subsidised) tariffs: Monthly electricity prices, inclusive of VAT, as a function of kWh

Fig 2.1: Standard tariffs: Low consumption (0 – 1000 kWh): Monthly electricity prices, inclusive of  VAT, as a function of kWh consumed per month.

Fig 2.2: Standard tariffs: Medium consumption (1000 – 2000 kWh): Monthly electricity prices, inclusive of VAT, as a function of kWh consumed per month.

Fig 2.3: Standard tariffs: High consumption (2000 – 4000 kWh): Monthly electricity prices, inclusive of VAT, as a function of kWh consumed per month.

Conclusions

For limited capacity supplies, eThekwini offers a very low-cost, lifeline supply tariff (up to 150 kWh per month) to indigent customers. However it is not really fair to compare this with the limited capacity supplies of other distributors, which are available somewhat more generally to low-income, low-consumption customers in shacks or townships.

In ascending order, other low-cost, limited-capacity supplies are offered by Nelson Mandela Bay (up to about 450 kWh per month), Ekurhuleni (up to about 750 kWh per month) and Eskom (up to the full capacity of a 20 A prepayment meter). Cape Town offers a medium-priced limited-capacity supply up to 350 kWh per month, rising sharply thereafter for higher consumption up to 450 kWh per month. Tshwane provides the highest pricing of the limited-capacity supplies, over the full range from 0 – 1,000 kWh per month.

City Power does not offer a limited-capacity tariff, but for comparative purposes the 60 A City Power prepaid tariff option is shown in Fig. 1. This indicates that its standard tariff, with three times the capacity of a 20 A limited-capacity prepaid tariff (such as that of Eskom), is still priced reasonably in the mid-range of the limited-capacity supply tariffs, over the range of 0 – 1,000 kWh per month.

With standard tariffs, low-consumption domestic customers using up to 1,000 kWh per month on the City Power 60 A prepaid meter standard tariff option enjoy the lowest pricing. As a result of their high fixed monthly charges, the City Power 60 A and 80 A credit meter standard tariffs give the highest monthly billing for consumption up to 700 kWh and 750 kWh per month respectively, after which Cape Town rapidly assumes pole position for the highest electricity prices.

For medium-consumption domestic customers, over the range of 1,000 – 2,000 kWh per month, the City Power 60 A prepaid meter standard tariff continues to provide the lowest pricing, while Cape Town gives the highest.

For high-consumption domestic customers using from 2,000 – 4,000 kWh per month on standard tariffs, Cape Town continues with its position as highest priced of all, followed closely by Eskom, while the City Power 60 A prepaid meter standard tariff continues to provide the lowest pricing up to 3,000 kWh per month, after which eThekwini takes the lead. DM

This feature was first published by EE Publishers.

Photo: Power towers are seen outside the Koeberg nuclear power station on the West Coast outside Cape Town, South Africa, 18 February 2015. EPA/NIC BOTHMA