How expensive is our electricity really?

JOHANNESBURG - Government and Eskom have made much of the fact that South Africa's electricity prices are amongst the lowest in the world. The suggestion is that domestic consumers of electricity (and others) should not whinge too much at another few rounds of swingeing price hikes at the 31.3% level. But how cheap is electricity for South Africa's domestic consumers really?

As the economist Mike Schussler has noted previously the pricing for industry may still be low, but the recent tariff increases have hit residential end users hard. Many municipalities make huge profits from selling on Eskom electricity to residential consumers.

How then do the prices domestic users pay in South Africa compare with, say, users in the United States? Below is a table comparing - somewhat unscientifically - the current costs of electricity for domestic consumers in the largest metropolitan areas in South Africa, with the average ultimate retail price of electricity to residential customers in the different states in the USA in May 2009 (see source).

The conversion from USD to ZAR pricing was made using the average exchange rate in May ($1= R8.36). Many of the metros have a bewildering variety of tariffs depending on the means and extent of consumption. But for this rough guide we have used medium to low domestic consumption - where the tariffs are available solely in cents per kilowatt hour (i.e. not including an additional daily rate.)

As can be seen from the table at the moment such domestic consumers in South Africa's metropolitan areas pay similar tariffs to residential consumers in the cheapest American states. However, if electricity tariffs increase in South Africa at 31,3% over the next few years the price will more than double. Domestic consumers will then be paying as much, if not more than, residential consumers in even the most expensive US states.

Cost of electricity for residential users in South Africa metros and US states - price from least to most expensive:

Sources: Energy Information Administration, US; Tshwane municipality, Ekurhuleni municipality, Johannesburg municipality, Nelson Mandela Bay municipality, Cape Town municipality, eThekwini municipality.

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US Price comparison You just cannot make any price comparisons if you don't compare income.How many people in South Africa earn $5000, 00pm? by Jack on August 31 2009, 23:53 Find this comment inappropriate? Report it

How expensive is our electricity really? This is a largely meaningless comparison as the considerably higher income levels in the US as against SA are not considered. The figures would thus in reality indicate that we pay substantially more, relative to the US consumer,for our power! by Heinz Althaus on September 01 2009, 00:02 Find this comment inappropriate? Report it

cost of doing business And the Alliance partners lambast business for continuing to retrench! when the cost of business continues to rise on the back of incompetence and corruption within government run entitites. In addition to the recent electricity rise in Jhb we had a 28% . .more increase in business municipal rates. Eskom got an increase of 31.4% less a 2cents government levy per KWt and the Metro because it added the full 31.4% increase to the end user cost and not just the bulk cost, also because of the stepped electricity rates, ended up by adding on an average of another 20% to the electricity increase. SO National government, Eskom and the Metro all piled into the opportunity to extract more out of the already overburdened consumer. The government levy is not ring-fenced so will go into the trough, Eskom needed the increase to meet uncontrolled expenditure and the Metro will use their increases for heaven knows what, it will certainly not go towards the maintenance and upgrading of the electricity distribution network and the City is so seriously illiquid that the extra revenue will undoubtedly get swallowed by their uncontrolled expenditure. . .less by Wendy on September 01 2009, 05:53 Find this comment inappropriate? Report it

Pulling the wool over . . . Who is Eskom trying to fool? As a small business, we are now converting our geysers (without Eskom's so-called subsidy) and installing alternative battery power such where our reliance on Eskom will substantially be reduced, including our monthly rip-off . .more bills. We will become self-sufficient and lost to Eskom as a client, once and for all. As more businesses do this, Eskom will have difficulty charging these rates to the poorest of poor. That will refocus their attention . . . . .less by Ironman on September 01 2009, 05:55 Find this comment inappropriate? Report it

who wrote this rubbish Please tell us what the average American family pays for telephony, food and petrol to name but a few items. This really is a waste of time because comparisons need to reflect the true income differentials and costs of ALL standard items in an average . .more family budget. . .less by ack on September 01 2009, 06:14 Find this comment inappropriate? Report it

Wooley Eskom Can you believe they are trying to get us to buy into this nonesense?!!! One can always do comparisons but you have to include the local consumers income, standard of living, etc etc. Eskom needs to be held accountable for its incompetence over the years . .more and then Mbeki too for the uselessness of lack of preparation and denial yet again that something needs to be done. Can you believe that Mbeki wanted to export our electricity to the the northern African regions and then ultimately Europe. So grand were his thoughts/dreams.We now sit with a situation where we import a lot of electricity. I challenge you to ask details of Eskom of the imports ie Coega and others.........I shake my head in dispair at the way the system is going in SA. . .less by Sarah B on September 01 2009, 08:23 Find this comment inappropriate? Report it

Venezuela Do the sums again and compare us against countries like Venezuela and Uraquay. At the same time do the tax sums also. by Molly on September 01 2009, 08:26 Find this comment inappropriate? Report it

Electricity cost comparison Having emigrated to S.Africa from the UK 11 years ago by comparison the comparitive cost of living has always very roughly been between 3 and 2 times expensive in the UK compared with here. This may help to adjust matters a little although the cost of . .more food appears for some reason to be closing the gap now. The USA has always been a little lower than the UK so I would hve thought that if you multiply the US costs by 1.75 that would be a better test. . .less by Robin Africa on September 01 2009, 08:37 Find this comment inappropriate? Report it

Electricity is a tax here in SA and it can be considered a bad one because it changes their behaviour (cooking less and braaiing more). Or a good one (less CO2). If you want to bring personal income in, you must also bring in things like climate (big plus) and crime (big minus). by Nic Roets on September 01 2009, 09:43 Find this comment inappropriate? Report it

Eskom Mismanaged by ANC Cadres ANC Cadre deployment has cost the country billions at Eskom, SAA, TRANSNET, the list goes on. This has resulted in non-delivery on ALL LEVELS. But ANC has not changed this ill-conceived policy of racial cleansing which is akin to the tretment of Jews in . .more NAZI Germany pre- World War 2. . .less by Thabo on September 01 2009, 09:47 Find this comment inappropriate? Report it

do all the sums you like SA state and parastatels are being by bunch of idiots and trumped up strugle veterans who have zero ethics or business savy its all about whats in it for me and my mates by poesbek on September 01 2009, 10:02 Find this comment inappropriate? Report it

This is not a cost of living comparison It is a cost of ellecricity comparison. The costs of eletricity are not related in anyway to living standrard/prices in a contr, therefore are a spurious requst from people. Is Eskom cheaper than many providers, answer probably remains yes. Was . .more it a lot cheaper, yes. Could it have stayed cheaper - not so sure . .less by Thabo Monare on September 01 2009, 10:49 Find this comment inappropriate? Report it

European Electricity Prices? How do RSA electricity prices compare to the European countries or those of emerging market economies? They are our peers, not the US. by Regime on September 01 2009, 11:47 Find this comment inappropriate? Report it

w@w.com Brilliant Mr. Mbeki. Brilliant. You genius. by Nasdaq7 on September 01 2009, 12:01 Find this comment inappropriate? Report it

VAT You must still add 14% VAT to the figures for South Africa as this is not recoverable by domestic users. Electricity in SA is not cheaper either for domestic or for production use than in countries we compete with. by WHL on September 01 2009, 12:06 Find this comment inappropriate? Report it

rental and service charges excluded eskom are not being truthfull. i had electricity installed on my property a it cost me R 10,000 TO HAVE THE ELECTRICITY CONNECTED B MY BILL BEFORE I USE 1KW OF ELECTRICITY IS R580 why don't eskom get an unbiassed foreign assessment done . .more on their performance and then they will see what a useless bunch of graveytrain idiots they are . .less by gatvol on September 01 2009, 12:08 Find this comment inappropriate? Report it

Elec prices Due to globalisation, the cost of building a power station is more or less the same everywhere.The price of fuel is also changing to be more universal, the additional costs of using more lower quality coal are going up (trucking). Those aren't the only . .more factors influencing the price. The subsidies from government for electricity, both generation and building sourced from tax is hidden and tends to skew things as most utilities are owned by the governments and that part of the cost is not evident in the costs presented. It seems the SA government has realised there is more to supplying electricity than buying coal for the power stations built 20 odd years ago. New power stations aren't cheap, ecspecially since ESKOM is now just an operator and a lot of the big components come from overseas. . .less by Dewald on September 01 2009, 12:41 Find this comment inappropriate? Report it

Get the competition going I cannot understand why they do not privatise Eskom? Competition should bring down prices and we will not have to rely on only one P******* vendor. by Freedom to choose on September 01 2009, 13:22 Find this comment inappropriate? Report it

What is wrong with you MONARE ? Cost of living comparisons compare affordability of similar products and services across borders. What Robin Africa seems to allude to is that electricity prices in SA are a much bigger problem for locals than they would be for Americans, even if the . .more prices are rather similar in common currency terms. For the consumer a cost of living comparison is very relevant, although misplaced. Plant and fuel prices are the same wherever, and the difference in the longer term is efficiency to a large extent. For power generation, which is capital and fuel intensive, domestic conditions such as less expensive local services, should have only a marginal benefit to domestic power pricing. You then make grandiose claims, refuting the obvious factual comparison above, with no hint of a factual argument. You are strange man! . .less by Sir Drake on September 01 2009, 13:45 Find this comment inappropriate? Report it

Electricity costs Were these prices of electricity direct conversions of exchange rate?????? If so, then washington at R0.65c per kwh is really $0.08c per kwh The question is, what percentage of a persons salary is $0.8c compared to R0.65c of a persons . .more salary in South Africa? Assume a salary of 3000 per month (dollars or rands) The percentage in $US=.000026% compared with R.00021.% Therefore electricity will be a 1000% cheaper in Washington!! That's excluding the vat we still have to pay!!!!!!! . .less by Mike on September 01 2009, 14:15 Find this comment inappropriate? Report it

SIlly Sir Drake Yes, SIr Drake a cost of living comparison is very valid for the consumer, but the point of the analysis is to compare costs. As your statement points, efficiency is to a large degree the differentiator in power generation with domestic local . .more services having onlymarginal input. Therefore to go on about local purchasing power is to create a spuriious comparison. If I look at the above, note that South Arican prices are cheaper than most. Also given the difference in costs per city, I think these are the rates charged per municpality which include a markup which in some municipalities can be 50% or more. So please try to think clearly before calling anybody silly. . .less by Thabo Monare on September 01 2009, 14:15 Find this comment inappropriate? Report it

did I touch a nerve? Why was my price comparison involving rate of exchange deleted???? Was I too close to the truth? by Mike on September 01 2009, 14:21 Find this comment inappropriate? Report it

I agree with Monare This is purely, if not entirely accurately, a cost comparison. This is in response to Eskom's contentions that we have access to the cheapest electricity in the world. WE clearly don't. (Even more so if you take income into account). by Swazi on September 01 2009, 14:23 Find this comment inappropriate? Report it

ENERGY SAVINGS WHILST ALL THE HIPE PREVAILS PERTAINING TO OUR HIGH ENERGY COSTS THERE IS VERY LITTLE FOCUS ON DROPING OUR CONSUMPTION. IF EVERY HOUSEHOLD COULD CUT THERE CONSUMPTION BY 30% WOULD THIS SAVINGS NOT GO A LONG WAY TO PREVENTING THE COSTS OF A NEW . .more POWER STATION? LCD LIGHTS / SOLAR GUEESERS / CEILING INSULATION / ENERGY EFFICIENT COPPER CABELING. THIS IS WHERE OUR FOCUS SHOULD BE. IN A COUNTRY WHERE 7% OF THE WORK FORCE ARE SUPPORTING 100% OF THE POPULATION TO ALL REAL INTENTS AND PURPOSES - WE REALLY NEED TO CHANGE OUR FOCUS IF WE INTEND TO MAINTAIN OUR STANDARDS OF LIVING GOING FORWARD. . .less by REASON on September 01 2009, 15:09 Find this comment inappropriate? Report it

Good article generally but some comments The respective salary of US to SA is only relevant from a cost component of the electricity generator/distributor labour costs. The US states have minimum wages far higher than SA. The US states do not have to subsidize industrial consumers by supplying . .more electricity below cost and tied to fancy commodity structures. Enron tried and everyone knows the Enron story by now! So much for privatization producing cheaper electricity! It does not! For those of you with a more inquiring mind I suggest you read the following: http://www.oxfordenergy.org/articles/WrightRutledge[trimmed].pdf to find out why the privatization of state utilities failed to provide cheap electricity to consumers. . .less by . on September 01 2009, 16:00 Find this comment inappropriate? Report it

Ekurhuleni EMM Tariffs more expensive than Washington tariffs. How disturbing. by Pops on September 01 2009, 16:03 Find this comment inappropriate? Report it

Ironic! UK expects power cuts due to under-investment in electricty sector. Hope SA emigrants who settled in UK will appreciate the . .more irony! http://news.sky.com/skynews/Home/Business/Britain-Could-Face-Widespread-Power-Cuts-By-2017-Says-Low-Carbon-Transition-Plan-Report/Article/200909115372284?lpos=Business_First_Home_Article_Teaser_Region_9&lid=ARTICLE_15372284_Britain_Could_Face_Widespread_Power_Cuts_By_2017_Says_Low_Carbon_Transition_Plan_Report . .less by . on September 01 2009, 20:36 Find this comment inappropriate? Report it

Dear MONARE My principle point, if you missed it, is that your arrogance in trashing Robin Africa was uncivil and proves your tardiness in reasoning. If you can point to any part of my argument as being false or irrelevant then perhaps you would be justified in . .more questioning the clarity of my thoughts. As things stand you have only proven the point that you are an arrogant twit with little contribution to make. Robin Africas point would not have provoked insults from a reasonable person, even though you are right, as I have also suggested, that it may not be a train of thought that would steer us to great conclusions. But your attempt to read into these figures perverse conclusions is really just that one step too far old bean. What these figures do show is that the current pricing is not exactly cheap, as we were lead to believe, and once Eskom and the municipalities have doubled prices one and a half times, our municipal electricity prices will be very high compared to those in the USA. Robin Africas point would then be relevant if it would question the proportional municipal taxation increases implied. . .less by Sir Drake on September 01 2009, 21:28 Find this comment inappropriate? Report it

The ugly truth The reason government managed companies like Eskom try to convince us that they cheap is simple. They are hiding their own incompetence by trying to make us believe that they are doing us all a favor, like providing "cheap" energy. The only thing that . .more these figures prove to me is that Eskom is corrupt and fraudulently trying to make us believe they are the "cheapest in the world". And yes, you need to take into account living cost and average salary. An attendant at a till point in US earns $10 per hour and in SA R8 per hour. This then multiplied by exchange rate means that you earn 10 times more per hour in the US. Thus for US citizens electricity to cost the same as in SA they should pay a minimum of R6 per kWhour. Any person with half a brain can see that we pay way more than we are suppose to. No matter how you look at this we are being ripped off. . .less by Anunaki on September 02 2009, 09:35 Find this comment inappropriate? Report it

ANC Cadres hogwash by Thabo the ANC will continue on its path of the transformation of our society and these matters are management issue which are being addressed...those that want to blame the ANC for its brevity in change must also acknowledge the ANCs admittances of . .more imperfection. The rest of the comments have stuck to the issue of comparatives and I laud your integrity regarding the subject here. . .less by Musa on September 02 2009, 13:24 Find this comment inappropriate? Report it

1st world vs 3rd world Which numnut wrote this? Why not compare 3rd world with 3rd world and then i garantee we are paying 3 times too much. Our supply is as irregular as any other 3rd world country. by Wah on September 02 2009, 20:05 Find this comment inappropriate? Report it

RUBBISH ARTICLE How many Macdonald $Hamburgers does US power cost compared to R same for SA power. Like with like pulease! SA journalism is gping down the tubes with everything else. Love from Moscow where at least the crime is organised. by CICERO on September 04 2009, 11:06 Find this comment inappropriate? Report it

UK/SA electric prices Electricity prices in SA have never been cheap, and I have never understood how people can claim that electricity is cheapest in the world. When I came to live here in 2002, my electricity bill per quarter in London was roughly equivalent to my monthly . .more bill here in South Africa - ie South African electricity was three times more expensive. In London I used a dishwasher and had a dryer for washing. In South Africa dishes are washed by hand and washing dries on the washing line. In London hot water water was gas heated, while in SA I have solar heating for hot water. The only electricity that is cheaper is the discounted electricity for big industrial businesses and iron smelters. However I have now made big savings by installing a solar electricity system for the house. This supplies 75% of my electricityfor household use, the rest comes from ESKOM, and my electricity bill a year ago was reduced by two thirds even in the winter months. With the current hikes in electricity prices, I am saving even more, and I reckon at current rates of price increases, my investment of R200,000 could be recouped within 7-10 years. So - go solar. It really is cheaper. . .less by trio on September 05 2009, 14:49 Find this comment inappropriate? Report it

pay as you go meter's pay as you go cost's ? and do the rates alter if you use more by DAVID FORRYAN forryan@vodamail.co.za on October 07 2009, 10:33 Find this comment inappropriate? Report it

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