Impact of Eskom restructuring on long-term tariffs

Genesis was commissioned by Business Leadership South Africa (BLSA) and Trade and Industrial Policy Strategy (TIPS) to assess the impact on the electricity tariff path if Eskom were to undertake a restructuring of its assets.

The purpose of the assignment was to present price paths for various restructuring scenarios, which could then be used to inform decisions about Eskom’s future strategic and organisational direction.

In order to evaluate the different asset restructuring options, a long-term tariff model was developed to assess the potential impact on electricity prices in South Africa, given the changes in investment planning decisions and cost drivers that would result from the various scenarios.

The model was developed to allow key components of the tariff structure to be leveraged so as to develop comparative price paths based on each scenario’s distinguishing characteristics. The components of the tariff path used were drawn from international experience and were influenced by the unique context of South Africa’s electricity supply industry.

The model enabled Eskom to weigh up the viability of each option and so to assist policy-makers in the decision-making process.