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Tuesday, May 26, 2020

The Impact of Electricity Price Increases and Rationing on the South African Economy,

Research Report. Centre for Poverty Employment and Growth, Human Sciences Research Council

Davies assesses the economic impact of electricity cuts on the South African economy. The paper investigates the potential economic impact of differently distributed pricing or rationing options to reduce peak electricity usage and electricity consumption. More specifically, it assesses the economy-wide impact of a reduction in electricity use of up to 10%, differently distributed across the main economic sectors and users; assesses the potential for short- and medium-term improvements in energy use by large consumers; and considers the potential impact of different pricing proposals on Eskom itself. This report first analyses the potential economic impact of either electricity price increases or electricity rationing as a way of reducing consumption. It then considers how firms in different industries might respond to electricity cuts or price increases. Finally, it reviews an appropriate price path for the electricity price. ‘Appropriate’ was defined as a price that balances the need to minimise damage to the economy, responsibly promote energy saving, and ensure reasonable financial health for Eskom.

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