Johannesburg most expensive, Richards Bay cheapest place to do business

By far the cheapest place for large companies to do business is Richards Bay. And the most expensive city is Johannesburg. This is according to a survey released yesterday of large metropolitan areas' electricity prices by international utility consultancy NUS Consulting.

In a comparison of "highest voltage maximum demand" tariffs available to clients requiring electrical capacity of 1.5 megavolt amperes, the northern KwaZulu-Natal coastal town ranked the lowest of 12 metros surveyed when it came to costs.

NUS opted to use this best-priced maximum demand tariff for the purposes of fair comparison, although it noted that some metros offered better options to large users.

It found that the Richards Bay tariff of 34c a kilowatt-hour was 26 percent cheaper than those in the next lowest-cost metros, Tshwane and Polokwane, which charged 46c a kilowatt-hour. It was cheaper than Eskom's own rate of 41c a kilowatt-hour.

At the other end of the spectrum, Johannesburg's comparable tariff was 62c a kilowatt-hour, nearly 10 percent higher than the next most expensive tariff of 57c in Witbank. Johannesburg's rate was highest because its seasonal winter pricing applied for four months of the year compared with three months in other metros, and because it added about 3c a kilowatt-hour in demand-side management levies and municipal surcharges, NUS said.

Lurking in the middle were Vereeniging (56c a kilowatt-hour), Durban (54c), Port Elizabeth (52c), Cape Town (51c), Sasolburg (50c) and East Rand (49c).

Widely divergent power tariffs between municipalities was a motivating factor behind the government's preference for regional electricity distributors (Reds), first proposed a decade ago. The Reds have struggled to get off the ground owing to concerns about constitutionally mandated local government autonomy.

The plan had been to rationalise tariffs from 2 000 to less than 10. The Financial and Fiscal Commission cautioned last month that a one-size-fits-all approach would not work. However, the NUS survey highlights that, in one form or another, there remains a need for a more standardised approach to electricity pricing.

Business Report