At the beginning of April, the Competition Commission released the second instalment of its Cost of Living report, and the findings on electricity pricing are difficult to ignore.
Electricity tariffs have increased by 85% since 2020, significantly outpacing inflation of around 30% over the same period.
From a regulatory perspective, household electricity pricing is determined through a two-stage framework overseen by National Energy Regulator of South Africa, involving bulk generation tariffs and municipal retail tariffs.
In principle, this is a cost-reflective system.
In practice, however, the final tariff paid by households includes more than just generation costs. It incorporates transmission and distribution charges, administrative costs, and in some instances, municipal retail margins used to address broader fiscal pressures.
The effect of this structure is not neutral.
Electricity pricing becomes a transmission mechanism for broader economic pressure. The increase does not remain confined to utility bills, it filters through to food prices, transport costs, and small business operating expenses, amplifying cost-of-living pressures across the economy.
The more difficult issue is structural.
Municipalities operate as legally protected distribution monopolies, meaning there is no competitive constraint on efficiency or cost discipline. In such an environment, pricing mechanisms risk being used not purely for cost recovery, but to supplement municipal revenues.
This raises an important question: at what point does cost recovery begin to resemble an embedded fiscal instrument rather than a utility charge?
The Competition Commission has rightly flagged the need to examine tariff-setting mechanisms more closely, as well as to consider targeted protections for vulnerable households.
But the deeper issue remains unresolved:
Are electricity tariffs reflecting underlying costs, or are they increasingly absorbing inefficiencies elsewhere in the system?
Until that distinction is addressed, electricity pricing will continue to function as a key driver of the cost-of-living crisis, rather than a neutral input into it.
