Now Eskom says ‘Eish’

2013-03-01 00:00

PIETERMARITZBURG residents facing a pricey power hike can breathe a sigh of relief after Eskom’s request for a 16% tariff increase was halved.

Msunduzi Municipality was looking to add even more to the power utility’s requested tariff to the National Energy Regulator of South Africa (Nersa).

Yesterday, Nersa announced that it had limited Eskom’s electricity increase for the next five years to an annual eight percent rise.

Msunduzi municipal manager Mxolisi Nkosi was thrilled — and had some good news for residents.

“Looking at what was announced, our tariffs will increase between eight percent and 10%. It certainly won’t go over 10%,” he vowed.

Council, he added, would decide by March.

The Pietermaritzburg Chamber of Business was equally delighted.

“The rate at which electricity has been increasing has literally been putting people out of business.

“We look forward to hearing what Nersa’s recommended tariff for municipalities is and we look forward to a more realistic proposed tariff from out local municipality,” said CEO Melanie Veness.

Still, not all were happy and some felt more could have been done.

Chairperson of the Msunduzi Rates Forum, Babs Sithapersad, said eight percent was “quite an improvement”, but still substantial.

“It should be keeping with inflation rate of 5,5%,” said Sithapersad, adding the increase was “based on profit-making”.

He said the tariff would impoverish ratepayers in the city, especially those in the middle and lower income brackets.

Sharing a similar sentiment was Alan Smaldon, who is the chairperson of the Central Outer Ratepayers Association in Durban.

“As prices go higher, it will result in more poor people. As we speak there are elderly people who are battling to live and have to decide on whether to get something to eat or medication.

“This hike is a poor reflection of our society because Eskom will still make profits and hand out bonuses to their executives,” he said.

When Eskom asked for 16%, it immediately ran into huge opposition from the South African public.

The authority reasoned that it needed the extra funding from higher tariffs to pay for its expansion programme. For years Eskom has been on the margins in terms of its capacity to meet the country’s power needs.

And on this score there was some sympathy for Eskom from Andrew Layman, chief executive of the Durban Business Chamber. He said business and ordinary citizens would celebrate, but only in the short term. “Eskom didn’t expect 16%, but didn’t need that much of a drop. The problem is that this might come back to bite us or we might run out of electricity capacity,” he explained.

According to Nersa, the average electricity price will increase to 65,51c/Kwh in 2013/14 up to 89,13c/Kwh in 2018.

Last year, Eskom made a revenue application for the third Multi Year Price determination (MYPD3), looking for a 16% tariff increase to cover the period between April 2013 and March 31, 2018.

In the application, 16% would have resulted in required revenues for Eskom of more than R1 trillion. However, the current approved increase will result in allowable revenue of R906,6 billion, said Thembani Bukula, the regulator member responsible for electricity regulation at Nersa.

The new tariffs will take effect for Eskom customers from April 1, 2013 and for municipal customers from July 1, 2013.

The reduced tariffs are expected to be a boon for the farming industry, particularly KwaZulu- Natal’s cane-growing sector, which was facing possible job losses of some 35 000.

Brian Aitken, president of the KwaZulu-Natal Agricultural Union, said electricity tariffs hurt farmers who relied on irrigation.

“This is a stroke of good news after a bad few weeks where the farming industry saw wage increases of up to 53%.

The eight percent is better than 16% considering that farmers are under a lot of pressure. In terms of food security, food production is dependent on irrigation and we need electricity,” said Aitken.

Eskom said that it would study the decision in “detail to understand its consequences and assess its impact”.


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