Huge Eskom hike soon

2012-02-15 00:00

IT’S no April Fool’s joke.

Electricity provider Eskom’s third scheduled electricity tariff hike comes into effect on April 1.

The 25,9% rise follows the 25,8% one in 2011 set by the National Energy Regulator of South Africa (Nersa) in 2010.

The first of the three — 24,8% — took effect that year.

Eskom’s spokesperson Hilary Joffe confirmed the tariff increase and said that it will apply to all customers.

However, municipal increases will kick in on July 1 when municipalities begin their financial year.

Joffe explained that tariffs were still too low and would not yet meet Eskom’s production costs.

Joffe said: “Electricity tariffs are still below electricity producing costs, so they have to go up to cost-reflective prices.

“However, the increase for the next three years is yet to be decided and Eskom has yet to apply.”

President Jacob Zuma, in his state of the nation address last week, said he would approach Eskom to find options to cut power costs.

Joffe said Eskom shared his concerns and would communicate with him once these options had been found.

Efficient Group chief economist Dawie Roodt commented that households would suffer most from the price increases.

Even though businesses could cushion the blow, their increased production costs could lead to a rise in prices.

Roodt said: “25,9% is a hefty increase and it will certainly affect the disposable incomes of many households, which could lead to a damper on domestic demand.”

This could lead to an impact on economic performance, he warned.

“Add to inflationary pressure on the economy and the poor will be worse off,” he added.

Roodt said the economy could still continue to grow despite the impact of the price hikes because it had held up well in spite of the Eurozone crisis.

However, he stressed that the price hikes were necessary to improve Eskom’s capacity.

There are two factors that influenced the price hikes, Roodt explained.

“Firstly, the prices were too low in the past and they were going to catch up with them in the long run.

“Secondly, Eskom needs more money to build power stations to build their power capacity and meet demand.

“It did not have a choice but to raise the tariffs,” Roodt said.

According to Durban Chamber of Business CEO Andrew Layman, businesses that bought power from municipalities would bear the brunt of price hikes.

This was because the municipal financial year starts on July 1 and municipalities would now face extra costs.

“Municipalities might increase their prices by more than the Eskom prices, which is perfectly legal for them, but the tariffs will only take effect in July, which is the middle of winter, so their tariffs could be even steeper than if the tariffs were increased in the summer months,” he said.

Pietermaritzburg Chamber of Commerce CEO Melanie Veness

Turn to page 7

 

Electricity was once cheap

 

Electricity is not a cheap commodity.

But according to economist Dawie Roodt, South Africa’s electricity was once the cheapest in the world.

“The politicians in the past were reluctant for Eskom to raise the prices and they were not willing to spend on capital,” he said.

“Plus, Eskom had a lot of surplus electricity in the past.”

Durban Chamber of Commerce CEO Andrew Layman agreed with Roodt, saying that the prices were low.

“There was a time when the prices were low, but now were are on par with the rest of the world. Companies have had to make adjustments to the prices,” he said.

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