Here’s how Nersa’s price hike will affect your bill, and how solar can help
Electricity prices have increased by 500% in 16 years, and besides the latest Eskom hike, municipalities are still expected to add their slice.
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Consumers will soon pay much more for electricity, but those who can afford it can turn to solar power for help. While Eskom is sorry for load shedding but thankful for the increase, consumers will suffer as they shoulder the burden of the first double digit increase in years.
The National Energy Regulator of South Africa (Nersa) announced on Thursday that, based on the analysis of Eskom’s fifth multi-year price determination (MYPD5) revenue application for the 2023/24 and 2024/25 financial years, it had approved an 18.65% increase in electricity tariffs for the next financial year.
How much more consumers will pay will vary slightly depending on who you get electricity from, but for simplicity’s sake, they can expect an increase of around 20% after April.
“People who spend R500 per month on electricity can expect that amount to increase by R100, while those who spend R1 000 and R2 000 can expect an increase of R200 and R400 respectively,” says Roger Hislop, energy management systems executive at CBI-electric: low voltage.
And that is just for this year. In April next year it will jump again, meaning that consumers who pay R500 per month today will pay a minimum of R665 per month from next April.
However, that is not all.
Municipal price increases for energy are linked to cost of supply, which is the Eskom increase, but they can tack on additional charges, Hislop says.
“You could count on another 2-4% appearing on your bill, but it is likely these increases will only by announced mid-year.”
Liz McDaid, OUTA parliamentary and energy advisor points out that municipal tariffs usually come into effect in July.
“As far as I know we are not yet aware of what the increase would be for municipalities. For example, if the municipality adds 10% the person paying R500 now would be paying R649.”
Economic research group Oxford Economics Africa says although the increase is much less than the 32% Eskom asked for, the 2023/24 price adjustments are a big shock and exceed most assumptions, including its own of 9% increase, slightly higher than the South African Reserve Bank’s (Sarb) expectations.
“This will have inflationary implications down the line. Our baseline forecast is for CPI inflation to average 6.0% in 2023, compared to the 6.9% estimated for 2022, but price inflation will likely push higher than originally thought when the new electricity tariffs kick in later this year.”
The group says the cost of electricity in South Africa has gone up by more than inflation in recent years and administered prices have been stuck in an upward trend, which bodes ill for consumers and the inflation outlook.
“The power utility needs every cent it can get, but nobody wins with this outcome. Non-payment of electricity is a perennial problem for municipalities, and higher electricity tariffs could accelerate theft, which, ironically, is made easier by loadshedding.”
Energy regulator Nersa is clearly out of touch with the reality of the average South African and the timing of the announcement shows that, says CEO of Debt Rescue Neil Roets.
“This looming tariff increase will have severe socio-economic consequences for everyone in the country.”
He says the price of electricity has risen more than 500% over the past 16 years, far exceeding inflation over that time and that expecting South Africans to pay for the mistakes made by the national power producer, when the country is experiencing the most severe cost-of-living crisis in history, is simply untenable.
“A system that takes care of 80-90% of your electricity needs is the best option from a financial perspective, with a connection to the grid to recharge the batteries during cloudy or rainy weather,” says Teresa Kok, marketing director of One Energy.
“The last 10% to get entirely off the grid can prove very costly, as an entirely off-grid system would have to be sized at least three times larger than a grid-tied system that uses Eskom or council power as a backup when there is extended inclement weather. While adding a generator can charge up batteries, this comes with the ongoing costs of fuel, system maintenance and emissions.”
She explains this kind of hybrid solar system consists of an inverter, solar panels, and battery storage, as well as a grid connection. Therefore, it provides electricity cost savings and back-up during power outages.
On an electricity bill of R2 000 per month, which is around 670kW usage per month at a tariff of R3.50 per kW (effective 1 July with the latest tariff increase) the system spec and cost will be R159 000 for a 5kW Sunsynk Inverter, 7.2kWh li-Ion batteries, 4.7kW solar panel array and installation, as well as all materials and certificate of compliance (COC).
Kok says this size system will generate 90% of your daily electricity needs at 20kW per day.
On an upfront purchase based on an 18.65% electricity tariff increase this year and 12.74% for the next year and then a very conservative 5% per year thereafter your breakeven point will be just over six years based on electricity savings. However, this figure does not factor in the increases that local councils will add on top of this.
“Based on a very conservative escalation of 5% in electricity tariffs from year 3, your cumulative savings on electricity costs will be R350 000 after 10 years and R920 000 after 20 years, a savings multiple of 5.8 on your original investment of R159 000.”
Consumers who choose to do this on a finance option, will pay R3 657 per month based on the prime interest rate, with a finance term of 60 months with no annual escalation, although figures may vary based on your credit rating and rates applied.
“Your system will be fully paid off in five years and you will own it and for the rest of the 20+ years of your system lifespan, you will be generating your electricity for free, with only a 10% reliance on grid electricity.”
Kok says based on the very conservative escalation of 5% in electricity tariffs from year 3, your cumulative savings on electricity costs will be R350 000 after 10 years and R920 000 after 20 years, a savings multiple of 4,2 on your original investment of R159 000.
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