Unions to fight new tariff hike

2013-01-14 00:00

UNIONS are fearful that a successful application by Eskom for a 16% electricity tariff increase could have devastating consequences for manufacturing in South Africa.

The National Union of Metal Workers of South Africa (Numsa) is already planning protests at public hearings this month.

Addressing the media in Durban yesterday, Numsa general secretary Irvin Jim said the organisation had conducted a snap survey in the smelting and steel manufacturing industries.

It was found that more than 37% of companies in these sectors could shut down if the application were approved by the National Energy Regulator of South Africa (Nersa).

The union surveyed 10 energy­intensive companies, each employing between 300 and 800 people.

To oppose Eskom’s application for an increase, the union will hold pickets at the nine provincial public hearings hosted by Nersa throughout January. The hearing in Durban will take place on Thursday.

Eskom has said the current three-year tariff determination known as the “multi-year price determination 2” (MYPD2) by Nersa would end in March 2013.

Commenting on the increase and possible job losses, Jim said there was “ample evidence” that companies were already suffering from “the threefold average increase of Eskom’s electricity prices from around 20c/KWh in 2007 to the present rate of 61c/KWh”.

The union also claimed the application would double the price of electricity, projecting that there could be a staggering 110% increase over the next five years.

“This will undoubtedly be the last nail in the coffin for many companies,” he said.

Eskom was asked for comment, but declined until the public hearings are concluded.

Instead, it supplied an old press release in which Brian Dames, chief executive of Eskom, announced in October last year that the state-owned entity would seek a 16% tariff increase each year for the next five years.

He reportedly said the increases were needed to cover the costs of providing power to the country.

“We run one of the world’s largest power systems … we have a growing economy and we need to invest as a country in our future,” he said.

Dames explained that electricity prices covered the full cost of producing electricity.

“This includes input costs such as coal, maintenance and human resources, as well as the cost of servicing the debt raised to finance Eskom’s new build programme.

“The application also provides for the introduction of new independent power producers, particularly in renewable energy,” he added.

However, Jim argued that Eskom’s balance sheet was “healthier than in previous periods”, revealing that despite reduced tariffs in the third year of MYPD2, the company’s net interim profit for the 2012 financial year was more than R12 billion.

If the increase were granted, Eskom stood to make R46 billion for its shareholder, the government, said Jim.

“As a state-owned entity, Eskom should not be generating a return for our government at the expense of the economy and South Africans,” he said.

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