The Economic Impact of Electricity Price Increases on ... - Eskom

Purpose <strong>of</strong> this study
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• For much <strong>of</strong> the past three decades, electricity prices in South Africa have been low and declining. But from 2008 the trend in
prices took a dramatic turn when, in response to serious power supply shortages, Eskom embarked on a massive build
programme to increase power generation capacity and between 2008 and 2011 real electricity prices rose by 78%.
• This report was commissioned by Eskom as part <strong>of</strong> its preparation for the third Multi-Year <strong>Price</strong> Determination (MYPD 3)
process. Given the sharp increases in electricity prices in recent years and the need for further tariff increases, the overall
objective <strong>of</strong> this study was to contribute towards an better understanding <strong>of</strong> the potential impact that further electricity price
increases could have on the various sectors <strong>of</strong> the sectors <strong>of</strong> the economy by consolidating the findings <strong>of</strong> a number <strong>of</strong>
existing studies and academic papers on the subject.
• <strong>The</strong> report is structured around four chapters:
Introduction
Chapter one gives some context to the broader analysis <strong>of</strong> the impact <strong>of</strong> rising electricity prices on different sectors <strong>of</strong> the
economy, by providing a brief overview <strong>of</strong> the current structure <strong>of</strong> the South African economy and the trend in and drivers <strong>of</strong>
electricity consumption.
Chapter two <strong>of</strong>fers an assessment <strong>of</strong> the vulnerability <strong>of</strong> different sectors <strong>of</strong> the South African economy to rising electricity
prices.
Chapter three considers the findings <strong>of</strong> studies on the impact <strong>of</strong> rising electricity prices on sector output, employment and
pr<strong>of</strong>itability.
In Chapter four we explore the policy options available to government in the context <strong>of</strong> increasing electricity prices and the
case for industry support.
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