Manufacturers affected the most

2009-05-27 00:00

“EXTRAORDINARY times require extraordinary measures,” so starts the Pietermaritzburg Chamber of Business (PCB) submission on the Msunduzi Municipal Budget 2009/10. Below is an extract on a way forward in dealing with electricity hikes.

“In considering the ways in which the municipality may be able to assist manufacturers in distress, it has become clear that a reduction in their expenditure on electricity would be of significant importance. In particular, the so-called demand (kVA) charge is the critical component of the tariff structure. This, applied by both Eskom and the municipality to its clients, results in large payments having to be made for electricity that is not actually used. It means that manufacturers that are forced to reduce production in the absence of orders, are not able to benefit from the reduction in their electricity consumption. By introducing far greater flexibility in terms of the frequency with which a revised demand may be submitted to the municipality (or by the municipality to Eskom), a considerable amount of money may be saved. The Chamber believes that modern technology would support such flexibility and allow users to notify revised demands either quarterly or monthly. At the same time, the municipal bylaw 27(2)(C) of the Electricity Supply Bylaw should be considered for repeal so as to move towards a situation where consumers pay for what they use.

The Chamber’s investigation into the respective tariffs reveals that the municipal kVA tariff is 435% higher than the same tariff imposed by Eskom. While Eskom’s combined network demand and network access charges amount to R18,39, some manufacturers, including one that is fighting for survival, are paying R79,96. Furthermore, our manufacturers are distinctly disadvantaged relative to other localities. In Ekerhuleni, for example, the demand charge for a C tariff (>25kVA) is R61 and that for a D tariff (>100kVA), R23,34. A company in Howick pays only R24,06 for its kVA portion of the tariff.

It is clear that these comparisons show Pietermaritzburg manufacturers to be at a distinct disadvantage relative to their competitors. While the tariffs cannot be restructured for implementation during the new financial year, they require attention as soon as possible. The Chamber remains disappointed that its request made several years ago that the tariffs should be reviewed has not resulted in any change. We understand that a consultant appointed to do this, inter alia, withdrew from the project and another had to be engaged. We regard this as a matter of urgency and would suggest that when tariff concessions are being considered, those manufacturers that employ larger numbers of people should be favoured. To this end, the PCB has requested research into an appropriate index of labour intensivity.

Since the compilation of the draft budget which catered for a 25% increase in Eskom tariffs, we understand that an increase of 27% has been approved. The decision reflected in the budget that the municipal tariffs should be increased by only 20% for bulk users (and 22% for others), is welcomed. [Since this submission the municipality has recommended that all electricity consumers pay the full hike of 27,5%]... but it needs to be pointed out that as far as the demand charge tariff is concerned, the Eskom price will be increased from R18,39 to R23,36, while the municipal tariff will go from R79,96 to R95,95. This will represent an increased profit of R11,02 to the municipality. It is recommended, therefore, that, at the very most, the amount of the increase to the municipal tariff should be confined to the extra amount that will have to be paid to Eskom, that is R4,97.

Every effort should be made to find particular ways in which companies facing possible closure during the year should be given relief in respect of electricity charges, since it is clear that these are unduly onerous in our city and this is a sphere in which temporary concessions could be more easily granted.”

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