Power won’t come cheap

2013-01-27 10:00

Tariff hikes will seal fate of ailing mining firms, says Numsa

South Africans’ daily struggle to keep their jobs and pay their bills amid spiking costs was a key theme of the hearings on ­electricity tariff hikes this week.

Eskom is asking for a 16% increase over five years, which will more than double the price of power.

This will be its third application before the National Electricity Regulator of SA (Nersa) for a ­multiyear tariff hike.

However, Eskom has been a lone voice, with all submissions heard over the past two weeks pouring scorn on its request.

Nersa regulator panel member Thembani Bukula said that so far the submissions had been thorough.

“What we are getting so far from the hearings is thatpeople feel the increases must be inflation related.”

Labour federation Cosatu and its affiliate, the National Union of Metalworkers of SA (Numsa), have been picketing at every hearing in the provinces in which they have already been held to voice their opposition to the tariff hike. In Potchefstroom, North West, on Wednesday, the impending loss of 14 000 jobs at mining company Anglo American Platinum (Amplats) cast a dark shadow on the hearings.

Electricity tariff hikes will be the final nail in the coffin for ­struggling mining companies, leading to further losses of thousands of jobs, Numsa said.

Numsa’s George Makhanya told the Nersa panel in Potchefstroom that Eskom itself admitted in its application that the mining and manufacturing industries would be hardest hit by their proposed increases.

“Mining forms the backbone of economic activity in many towns across North West. Already, this is a sector in distress,” he said.

“We all know that 14 000 jobs are already at stake at Amplats, with other platinum mining companies also in dire straits.”

He said households would ­experience electricity increases that are far above inflation and ­also warned that the price hike would have a severe ripple effect on workers and sow discontent.

“Look at what is happening around you. If you grant this, it will make this country ungovernable,” said Makhanya.

“This price hike is ludicrous and without basis.

“In addition, municipalities would add their own fee as well on top of this price hike.”

Cosatu’s North West secretary, Solly Phetoe, said his federation had a huge problem with the power utility’s increase in return on assets from 0.9% to 7.8% over the five-year period, which contributed to the 16% hike.

“This represents a massive 767%,” Phetoe said. “Cosatu doesn’t believe this is necessary for a state-owned enterprise.

“Eskom must operate according to developmental objectives of the country and not like a private company, whose main objective is to make more profit.”

Earlier, Mike Rossouw from the Energy Intensive User group had said that from 2002 local industrial ­energy prices had shot up by more than 250% in real terms, “which according to this research is the highest ­increases found anywhere in the world”.

The group, which represents big industry, such as mines and smelters, will be making its presentation on Thursday in Johannesburg.

Eskom’s message was consistent throughout the hearings though: we need the 16% to keep South Africa’s lights on because the current fees are not enough.

Eskom needs average increases of 13% over five years for its own needs, plus 3% to support the entry of new independent power producers.

The 16% is needed to secure resources to run existing operations – coal, maintenance, human resources – and support the financing of new capacity.

Mohamed Adam, head of regulatory and legal affairs at Eskom, told City Press that apart from needing the 16% to keep the lights on and introduce new independent power producers, they also needed to keep a healthy balance sheet to secure financing for new projects.

Question after question at the hearings concerned why the price hike could not be inflation related.

Adam said this was because South Africa had not had cost-effective pricing.

“For the past two decades, price increases were well ­below inflation and that means we now have to play catch-up.”

Mokete Mokoena, a small business owner from Klerksdorp near Potchefstroom, said after the hearings: “This increase will kill small businesses and their dreams.”

Lettie Dikeng from Rustenburg in North West felt the hike would destroy her family’s livelihood.

At the Bloemfontein hearings in the Free State, it became clear that farmers would bear the brunt of the price increases, with some agricultural rates as high as 72%.

Dan Kriek, president of Free State Agriculture, said his organisation was “extremely concerned” and more job losses were on the cards if the hikes were granted.

“This is counterproductive towards the development goals we are striving to achieve,” he said.

Kriek said new farmers could simply not afford new installations. A new small electricity transformer cost R17 000, while it cost R202 000 per kilometre to lay new lines, for which farmers had to pay upfront.

“Food prices on a retail level will most certainly rise due to the likely production limiting impact in primary agriculture and the cost increase throughout the entire food chain,” Kriek explained.

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