Tag: Electricity

Interest Rates, Petrol, Electricity – The Big Increases of 2022

After a brief reprieve at petrol pumps in January, South African motorists can expect another hefty hike in February on the back of ever-increasing international oil prices, according to the economists from the Bureau for Economic Research (BER).

Following a rather tumultuous first trading week of 2022, global equity and bond markets were calmer last week. Commodities saw more action, with the one-month Brent crude oil future ending the week more than 5% higher, the group said in a research note on Monday (17 January).

“A combination of oil demand holding up despite the Omicron-driven surge in Covid infections (especially in the US) and supply disruptions boosted the oil price,” it said.

“After some reprieve on the domestic fuel price front in January, the renewed rise in the oil price is likely to result in another hefty fuel price increase in February.”

Interest Rate  

There will also be a significant focus on inflation data this week ahead of the South African Reserve Bank’s interest rate decision on the 27th of January, the BER said.

“We expect the headline CPI to increase by 5.8% y-o-y (consensus is at 5.7%), up from 5.5% in November. This is courtesy of a projected 0.4% m-o-m rise, driven by the more than 70c/litre rise in both the petrol and diesel price at the start of that month, as well as the quarterly survey of rental costs.

“As a result of the seasonal rise in meat prices, the food category should also add to the overall monthly CPI increase.”

South Africa is likely to see at least three interest rate hikes in 2022 as the South African Reserve Bank (SARB) has indicated that it will begin unwinding its accommodative monetary policy stance.  In a research note published on the  4th of January, the group said that the SARB’s quarterly projection model calculates a steep interest rate hiking cycle – resulting in interest rates of 5.75% by the end of 2023 and 6.75% by the end of 2024.

“In our view, well-behaved inflation, anchored inflation expectations, and a pedestrian growth outlook advocate a more moderate interest rate hiking cycle,” Momentum said. “We expect the SARB to hike interest rates thrice by a cumulative 75 basis points in 2022 and a further three times by another 75 basis points in 2023.”

Electricity Price Increases 

The National Energy Regulator of South Africa (Nersa) is also expected to table its 2022/23 price determination in parliament at the end of February or at the beginning of March. Chief financial officer for Eskom Calib Cassim, has confirmed that the state-owned power utility has applied for an electricity price increase of 20.5% for its 2023 financial year, set to take effect from 1 April 2022.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was implemented on 1 April 2021. A hike of 17.80% for municipalities commenced on 1 July 2021. Cape Town mayor Geordin Hill-Lewis has warned that similar increases would simply be unaffordable for most South Africans this year.

“Like the majority of South Africans, many Capetonians are struggling to make ends meet. The pandemic and national lockdown led to the closure of hundreds of businesses in our City and the loss of thousands of jobs. Our residents are faltering under the burden of the rising costs of energy, fuel, food, and basic consumer goods.

“The consumer price index (CPI) is currently stated as 5,5%; this would have been a more reasonable tariff increase for Eskom. The price of electricity has risen by 307% over the past 13 years, far exceeding inflation. Despite paying more for power, South Africans have experienced an unreliable electricity supply — 2020 and 2021 were two of the worst load shedding years on record.”

Stage 2 Loadshedding from 16:00

Eskom announced that stage 2 load shedding will be implemented from 16:00 on Tuesday afternoon until 05:00 on Wednesday morning.

On Tuesday afternoon, a generation unit at the Kusile power station tripped, adding stress to the already constrained power system. A unit each at Matimba and Arnot power stations failed to return to service as previously anticipated.

“These constraints are expected to persist for the rest of the week, which may require the load shedding to be extended,” Eskom said in a statement.

Total breakdowns at Eskom plants currently amount to 17 933MW, while planned maintenance represents 3 451MW of lost capacity. Emergency generation reserves are currently “extensively” used to supplement supply Eskom said in its statement.

Over the past 24 hours, Eskom returned one generation unit each at Camden, Kendal, and Medupi power stations. But during the same time, two generation units – one each at the Arnot and Hendrina power stations – tripped.

In addition, another unit at Arnot and a unit at Lethabo power stations were also forced to shut down. Following rolling blackouts over several days last week, load shedding was suspended on Friday evening bringing relief to South Africans and ensuring the lights stayed on for the election.

At the time, Eskom chief operating officer Jan Oberholzer expressed confidence that the vote counting process following the elections would not be affected by load shedding. However, he warned that the power system is still constrained, and some units are “extremely unpredictable and unreliable”.

NERSA Approves Floating Power Plants

NERSA, South Africa’s energy regulator, on Tuesday approved power generating licenses for three controversial floating power plants, stoking environmental concerns as Africa’s most industrialised nation struggles with electricity shortages.

Turkey-based Karpowership, one of the world’s largest floating power plant operators, in March won a government tender to supplement South Africa’s fragile electricity supply with gas-to-power projects at three of the country’s ports. The environment ministry subsequently blocked Karpowership’s permit application over concerns about the environmental impact of these power ships.

Karpowership appealed the decision and the National Energy Regulator of South Africa signaled its approval on Tuesday in a statement listing seven preferred bidders for the country’s Risk Mitigation Independent Power Producer Procurement Programme.

NERSA has not given the reasons for the approval yet.

Environmental groups have raised valid concerns about the Karpowership plants, which require fuel to convert liquefied natural gas into electricity. Opponents noted that the project will generate several million tonnes of carbon dioxide in a country that was already the world’s 12th-largest greenhouse gas emitter in 2019, according to Global Carbon Atlas.

Greenpeace Africa said it was “disappointed by the inexplicable decision to grant authorisation for this destructive and costly project”.

“It will lock South Africa into a high emissions trajectory that will derail our commitments to the Paris (climate) Agreement,” Greenpeace’s climate and energy campaigner Nhlanhla Sibisi said in a statement.

Karpowership SA still needs to secure several other authorisations before it can begin generating electricity.

South Africa is seeking to introduce several alternatives to its ailing state-owned firm Eskom, a coal-fired utility crippled by years of mismanagement, power generating units that constantly break down and struggle to meet electricity demand.

Loadshedding and rolling blackouts have been recurring for over a decade, stifling economic activity and investment. Eskom CEO Andre de Ruyter has been fighting corruption and mismanagement since his appointment.


How Much Is Karpowership Costing SA?

A well-publicized estimate of the total costs of the Karpowership deal shows the contracts, over 20 years, costing South Africa over R200 billion. This number is only the “evaluation tariff” the Karpowership company provided its bid for allocations under the emergency Risk Mitigation Independent Power Producer Procurement programme (RMI4P), multiplied by the absolute maximum amount of power Eskom can buy from the company in terms of the programme’s rules. This comes to a total of R225.7 billion over 20 years or R11.3 billion per year.

The RMI4P rules provide for a minimum guaranteed “take or pay” element where Eskom has to pay for a certain amount of power irrespective of whether it actually needs it or not. This is equal to 70% of the maximum possible sales ie R7.9 billion per year or R158-billion over a period of 20 years.

These, however, are only ballpark figures because the true tariff Karpower and other bidders will charge is tied to reigning gas prices, among many other factors. The figures represent revenue, which is a good measure of what Eskom will pay but a poor measure of how much money Karpowership will stand to make in the process.

The company included fuel costs, which it simply buys and sells onward as a “pass-through”. If that is removed from the equation, the elements that really make up Karpowership’s income becomes apparent. The main element, of course, is the capacity charge, or simply put, the rental cost of the power ships. There are also smaller items that the parent company charges to the local subsidiary, for example, spare parts.

Rental income and spare parts, which combined will make up the bulk of total revenue, all go to the international group. Smaller expenses will occur in South Africa. According to documents that Karpowership submitted as part of its local bid, the local component of costs comes to about 9.3% of the operating expenditure, excluding fuel.

What is the contract really worth to Karpowership?

As part of ongoing court proceedings involving allegations of corruption in the RMI4P process Karpowership has filed parts of its RMI4P bid that show the breakdown of expenses at one of its three proposed projects: Coega. According to this document the rent paid abroad will be roughly R35 billion, with another R6 billion earmarked for spare parts over the 20 years. This apparently excludes the fuel-ship that will accompany the power ships, which is an additional R11.7 billion.

This can be extrapolated to all three projects (keeping in mind that Saldanha is slightly smaller). The rental over 20 years comes to R95 billion – R4.75 billion per year.   Added to Karpowership’s total global rental income for 2019 the South African rent comes to a staggering 32% of the total. Add spare parts and the fuel-ships into the mix, South Africa could potentially contribute as much as 41% of the company’s non-fuel revenue.


Eskom 20% Increase with a 100% chance of Loadshedding

South Africans who buy electricity from their local municipalities will from Thursday pay nearly 20% more for their electricity.  This comes as South Africans already struggle to make ends meet with rising food prices, staggering unemployment, and the continued detrimental effects of the pandemic and consequent lockdown.  Apart from this, Alberton residents have had to cope with continued power cuts and failing infrastructure while Ekurhuleni fails to improve conditions.  Eskom has also been very clear on the continued load-shedding in the coming months.

In March 2021, Energy regulator Nersa sent Eskom correspondence approving the power company’s retail tariff and structural adjustment application and the schedule of tariffs for the period April 1 2021 until March 31, 2022.

In the correspondence addressed to Eskom’s chief executive Andre de Ruyter, Nersa said households that buy electricity from municipalities will see tariffs rising by 17.80%. Affected municipalities include amongst others Johannesburg, Cape Town, eThekwini, Ekurhuleni, Mangaung, Nelson Mandela Bay, Polokwane, and Tshwane.

Nersa also said that the 17.80% increase was exclusive of value-added tax, as the amount is determined by the minister of finance. Customers who obtain electricity directly from Eskom have already seen a tariff increase of between 14.75% and 15.06% from April. The steep tariff hike will be a major blow to consumers, especially considering that the fuel price in July is predicted to rise by more than 20 cents a litre for petrol and more than 40 cents a litre for diesel. These increases will also affect the prices of food and other grocery items.

Economist Duma Gqubule told SowetanLIVE on Wednesday that the increase would bring misery and suffering to households already struggling with the negative effects of Covid-19 lockdowns.

“The increase will add to the misery of South Africans in this once-in-a-century crisis. The electricity prices are rising in the middle of a lockdown and it is going to make things worse for many people. The country is going to fail to address unemployment, poverty and inequality.”

According to Gqubule, the South African Reserve Bank should come to the party by decreasing interest rates with an aim to give more financial relief to workers, some of whom didn’t get salary increases due to the lockdown.

“The worst thing the Reserve Bank could do at this point is to increase interest rates. Interest rates are still high in this country and anything that could alleviate the economic situation [would be welcomed].”

Gqubule added that the government has still not announced relief measures to counter the devastating impact of the current lockdown. He said the electricity tariffs increase was unsustainable for the economy and decimating businesses and jobs.

“We need a balance between debt price increase and government finance for Eskom. Government needs to directly finance Eskom to reduce the impact on the prices because electricity tarrifs have increase by up to five times over the past 12 years and this is unsustainable from a consumer, job creation and manufacturing point of view,” he said.

“Most people didn’t get salary increases and now they must pay this 17.8% electricity tariffs increase. It is unfair.”

Amendments to Electricity Regulations IS Great News

According to energy experts, the proposed amendments to the electricity regulations will pay great dividends in the long run. After many years of delays, President Cyril Ramaphosa announced a major step forward for independent power production. This amendment will allow independent contractors to produce up to 100MW of power without having to go through a long-drawn-out licencing process.

They’ll even be able to sell back electricity into the grid, providing they acquire the necessary permit from the National Energy Regulator of South Africa (Nersa). The Government’s announcement came on the back of a fresh round of rolling power cuts and repeated warnings from Eskom that power supply would remain constrained for the foreseeable future.

The amendment will pave the way for independent power producers to make electricity and sell it into the grid. The Government has been under intense pressure to open up the power market and energy economist, Lungile Mashele, said that the expansion of embedded generation puts a plan in place to help reduce Eskom’s load requirements.

“It is probably the best plan that helps Eskom both with their financial problems but also with their lack of capacity as well.”

Ramaphosa promised that the amendment would be published within 60 days – after that, there were still a great many details to be ironed out. Energy experts like Ted Blom are warning not to expect a miraculous turnaround immediately.

“For the guys who have the resources, it can happen in 60 to 90 days. For those who have to go through the rigmarole of changing their business plan and applying for funding, it could take a lot longer.”

The amendment will allow municipalities to customise their power mix and procure electricity directly from independent power producers. Unfortunately, this will take time, but there is light at the end of the tunnel.


Eskom fearful of electricity disruptions on eve of wage talks

Eskom put out an ominous statement on Friday, 30 April, ahead of its meeting about wages with its workforce’s unions next week. On Tuesday, 4 May, the power utility and its recognised labour representatives – the National Union of Mineworkers (NUM), The National Union of Metalworkers of South Africa (NUMSA) and Solidarity – will head to the Central Bargaining Forum to hash things out.

Eskom said that the wages talks could cause rising tensions and disruption to South Africa’s electricity supply and called on parties involved to “put the country’s best interests first.” In 2018, the last time these wage negotiations took place, the power utility started by offering workers a zero per cent (0%) increase, which led to strikes. The parties eventually settled on a 7% increase.


Eskom and the labour representatives are heading to the Central Bargaining Forum on Tuesday to kick off wage negations, which are expected to last for about a month until 3 June. The power utility cited the unpredictability of wage negotiations as the reason why tensions between Eskom and the unions could rise.

The power utility “assured the public” that it will do its utmost to reach a financially sustainable agreement with the unions that is in the best interest of employees, the public and South Africa as a whole.

Eskom suggested that any wage disputes could potentially affect the country’s already unreliable electricity supply as it could have a negative impact on the power utility’s infrastructure and operations.

 “If disruptions were to occur, these may have a negative impact on our infrastructure and operations, which may compromise our ability to supply electricity,” said Eskom.

“We would like to appeal to all the parties to the talks to conduct themselves in a manner that puts respect for the law, best interests of the country and its citizens first, and to do everything possible to avoid unnecessary disturbances,” said spokesperson Sikonathi Mantshantsha.

“This is particularly crucial as Eskom is, by law, providing a critical essential service.

NUM and NUMSA are calling for a 15% wage increase, while Solidarity is asking for 9.5%.

ESKOM Announces More Power Cuts for this week


On Sunday, Eskom said that it will be implementing load reduction in the Free State, Gauteng, KwaZulu Natal, and Eastern Cape province to avoid network overloading in high-density areas. The power utility said load reduction will take place between 5 pm and 10 pm. Areas like Soweto, Vaal, Msinga, Ladysmith, Msunduzi, and Butterworth will be affected by the load reduction.

Provincial statements issued by Eskom name the specific areas that will be experiencing power cuts.

“During the load reduction implementation, customers are urged to switch off all their electronic appliances to avoid possible damage due to power surges when supply returns.  Failure to do so may lead to transformer trips or failures, and damages to household appliances when supply is restored.”

Amazon is going to make its own electricity in SA

South Africa will soon be one of the countries where online behemoth Amazon generates its own electricity from “utility scale” solar and wind plants – and then it will use Eskom’s power lines to get that power where it is needed.

Amazon announced 26 such projects on Thursday, adding France, Germany, Italy, and South Africa to the list of countries where it will generate power to feed its large data centres, which support both its own services and those of many other companies. It has promised to be a “net-zero carbon” entity by 2040, and says the new projects will make it the largest corporate buyer of renewable energy on the planet.

At its present trajectory, 100% of Amazon’s business will be running on renewable energy by 2025, CEO Jeff Bezos said in a statement.

Amazon has been adding data centres in South Africa, and recently made it available as a “region” for data storage and processing, implying that its capacity will grow as does demand for such services in South Africa and nearby countries.

Though Amazon itself provided no details, Business Day reported that the power Amazon intends to generate in SA will come from a solar project in the Northern Cape, due to start construction in 2021. From there the power will be wheeled across the Eskom grid to where it is needed.

Such transmission using Eskom’s power lines is possible – mostly in a theoretical fashion – for other users. The Amazon project could “truly modernised electricity market in which consumers can procure cleaner energy through state-owned grid lines while paying for their upkeep in the process”, Chris Haw, executive director of the Sola Group, which is due to develop the project, told Business Day journalist Lisa Steyn.

Amazon says it has 68 solar rooftops at various fulfilment and sort centres around the world, plus 59 utility-scale solar and wind projects.

The announcement of Amazon’s project in South Africa came on the same day Eskom warned of a “a high probability of loadshedding” thanks to unexpected outages at a number of its – mostly coal-fired – power stations.

City Power clamping down on Illegal Connections

City Power has been targeting illegal power connections in businesses and residential areas in and around Roodepoort. This is the latest in an ongoing operation dubbed Kleena Joburg.  Several areas have been targeted for the cleanup of illegal connections, including

This is the latest part of the operation dubbed Kleena Joburg.

Some of the areas that have been targeted recently include Midrand where officials found that some residents and business owners had been connecting illegally to the grid. Illegal power connections appear to be a serious problem in the Roodepoort area.

City Power officials arrived unexpectedly at the Golden Meat Basket Butchery to the surprise of the owners. The butchery has been accused of stealing power. A man believed to be one of the owners of the butchery tried to convince officials to reconnect them but was unsuccessful in his endeavours.

Other neighbouring shops also lost their power as officials continued with the operation to disconnect illegal users.  Even a nearby church ended up being disconnected as owners failed to pay for electricity.  Joburg said that those guilty of stealing power would be fined R30,000 and needed to pay all arrears before reconnection.


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