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

Subjecting the electricity supply industry to greater competition and
private sector involvement has been proven to increase efficiency <strong>of</strong>
supply so that electricity demand can be met at a lesser cost (and
consequently lower tariffs)
• South Africa has been unsuccessful in attracting private sector involvement but higher tariffs and
regulatory reform will encourage participation
• International experience has shown that one way to achieve improved efficiency in the electricity
supply industry is to promote commercialisation <strong>of</strong> state-owned utilities and exposure the industry to
greater competition and private sector involvement.
• Despite the stated intentions, South Africa has failed to attract IPPs into the electricity supply
industry. Low electricity tariffs and an unfavourable regulatory environment have been identified as
some <strong>of</strong> the main factors that have hindered progress on this front.
• One <strong>of</strong> the first steps in encouraging IPPs to enter the market it to provide the right price signals by
subjecting customers to cost-reflective prices. In addition, the South African government is in the
process <strong>of</strong> creating an independent system operator that would act as a non-conflicted buyer <strong>of</strong>
power, the Independent System and Market Operator Bill was approved by Cabinet on 16 Mar 2011
Providing
targeted
support to
vulnerable
industries
Accelerated
EEDSM
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Subsidies
Policy Options
Promoting
competition in
the electricity
supply
industry
Gradual price
adjustments
Transition credits
Increased Competition
Exploring the
policy options
available
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