Eskom asks for double

2012-10-23 00:00

IF Eskom’s new five-year price hike proposal is accepted, your electricity bill will have more than doubled in the fifth year.

The electricity utility yesterday asked the National Energy Regulator of South Africa (Nersa) to greenlight 16% increases per year over a five-year period.

Three percentage points of this figure will go toward the introduction of new independent power producers (IPPs) to be added to the national grid.

In terms of the proposal, the average electricity price in the country — currently at about 61c/kWh (kilowatt hour) — will more than double in five years to 128c/kWh in 2017/18.

The new multi-year price determination (MYPD) is set to begin on April 1, 2013 and is proposed to run until March 31, 2018.

Eskom CEO Brian Dames said current tariffs do not reflect the cost of supplying electricity.

The proposed increases will help pay for ever-rising coal costs, and operational and infrastructure-related costs, such as power stations currently under construction.

“We are planning for a growing and successful economy. For that we need to continue to invest in electricity infrastructure which can support higher rates of economic growth and development, and extend access to electricity to all South Africans,” said Dames.

“Our application balances South Africa’s needs for a secure supply of power and for a sustainable electricity industry, with our recognition of the impact which tariff increases have on the economy, particularly on the poor,” he added.

In terms of the IPP programme, Eskom will buy power from new renewable energy producers, but this will come at a higher cost than electricity produced from coal.

Eskom argued that its build programme would benefit the economy through the injection of infrastructure to secure electricity supply, more jobs and spin-offs for local suppliers.

“There are currently more than 35 000 people on site at Eskom’s big build projects and more than R75 billion of contracts have been placed with South African suppliers.”

While the proposed increases are not as hefty as the previous multi-year agreements, economists said they would negatively affect the consumption and productive sectors of the economy.

Nedbank senior economist Nicky Weimar said the hikes appeared to be excessive given that the Consumer Price Index (CPI - August 2012) was five percent. She said Eskom should work on becoming more efficient.

“Ultimately, there will be less disposable income going forward, and businesses will also see it as a blow,” Weimar said.

Efficient Group chief economist Dawie Roodt said Nersa would probably lower the final hikes.

Mike Schussler, of, said Eskom should contain its costs more rigorously. He urged South Africans to make their concerns heard during the public consultation process.

National Consumer Forum (NCF) chairperson Thami Bolani said although Eskom needs additional funding, the proposed hikes would lead to further hardship for many.

“Perhaps something around or below 10% would have been acceptable. South Africans need to engage with Nersa on this,” he said.

Durban Chamber of Commerce and Industry (DCCI) CEO Andrew Layman said Eskom’s latest proposal was “moderate” compared with the above 20% hikes of the recent past.

“The proposed 16% hike will exceed inflation by a significant margin, however, and that will put strain on households as well as commercial and industrial consumers,” he said.

While Business Unity SA (Busa) said it appreciated the need for tariffs to be cost reflective, “the quantum and pace of tariff increases need to be carefully managed to forestall any negative impacts or shocks to the economy”.

Busa said the five-year approach would cushion the blow on South Africans, who have had to deal with heftier hikes over a shorter period in recent years.

The Pietermaritzburg Agency for Community Social Awareness (Pacsa) said Eskom is nationalising its costs and privatising its profits. The organisation has been conducting an ongoing campaign for affordable electricity. Campaign leaders Julie Smith and Mervyn Abrahams said these above-inflation increases could force the poor to reduce their already minimal use of electricity, impacting schoolchildren studying and forcing families to cook on fires once more.

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