Business

Eskom price hike will cause 'serious pain'

Denise Williams, Janice Roberts

Eskom is not an efficient producer and a 35% price hike will only throw the country into a deeper socioeconomic abyss, Nersa heard on Friday.

Eskom is not an efficient producer, alternative energy sources have not been fully considered and, above all, a 35% price hike will only throw the country into a deeper socioeconomic abyss, the National Energy Regulator of South Africa heard on Friday.

On the tenth and final day of countrywide public hearings, corporates, academics, human rights and wildlife groups, political figures and organised labour took the final opportunity to convince the Nersa panel not to support the proposed tariff increase.

Since Eskom’s last price hike, half-a-million jobs had been lost, Paul Crankshaw from the National Consumer Forum said in Midrand.

“These people now have to be supported by relatives and friends, so everyone has to cut their spending.”

The SA Human Rights Commission tried to convince the panel to adopt a “people first” approach when considering the application.

“While the SAHRC recognises that Eskom requires financial support, we are concerned about the impact of the 35% increase on the promotion of human rights as enshrined in our Constitution,” senior researcher James Motha said.

“A hike in electricity prices of 35% will further impoverish many and exacerbate existing inequalities.”

While there was no mention of electricity provision in the Constitution, power was important as it was seen as a basic service.

‘Serious pain’
Speaking on behalf of the Congress of South African Trade Unions, Dumisani Dakile said the price hike should be in line with inflation. He suggested instead of the proposed incremental increase of 35% each year for the next three years, a once-off tax of 1% should be looked into. He asked the panel to take the recent recession into account.

‘It’s [like] a patient in an intensive care unit and when he is starting to recover somebody stabs that particular patient,” he said to laughter.

Lorraine Lotter from the Chemical and Allied Industries Association said the increase would cause ‘serious pain”.

‘Then 769 000 people will move under the poverty line and 841 000 would move under the ultra poverty line,” she said.

James Hodge of Genesis Analytics said Eskom’s approach to its funding for the next three years was inappropriate, and more robust analysis was needed to isolate the funding gap.

The Freedom Front Plus contended the proposed increase was premature and a moratorium on the price should be implemented in the short term.

“What we are asking for is more time. The decision made by Eskom is knee-jerk and hasty,” said MP Anton Andries.

‘Who is footing the bill?’
Problems in Eskom’s finances needed to be explored. The party felt farmers and households were carrying the load for non payment by municipalities and electricity use by illegal immigrants.

‘Who is footing the bill? To my mind it would be the households and the farmers,” said Andries.

Former Eskom manager Michael Deeds said the new Kusile power station was not the right offering for independent power producers (IPPs).

“Kusile is too far in the future to make investment attractive for IPPs.”

Instead, he recommended that power stations like Lethabo be open to private equity.

“With IPPs, bait needs to be offered—hot bait that will make them come in now.”

The SA Local Government Association (Salga) said more expensive power would mean even more debt for already embattled municipalities.

The Chamber of Mines and Salga both said it was premature for the increase to be decided on without a revised integrated resource plan (IRP) within the National Energy Act.

‘It is decision making in the absence of supporting documentation and guidance,” said the chamber’s Dick Kruger.

Salga spokesperson Mthobeli Kholisa said: “There was no public consultation and we don’t know if the IRP is a legitimate document.”

There was also concern raised by the SA Pulp and Paper Industry over the ‘undocumented myth” that South Africa enjoyed cheap power.

One of the recommendations was that Eskom should regularly publish the electricity price of other countries and benchmark South Africa’s price against these.

In a last attempt to appease ‘finger pointers”, Eskom’s acting CEO Mpho Makwana argued the proposal was ‘good for South Africa”.

‘There’s no doubt that in the short term of the current MYPD2 [second multi-year price determinant] period Eskom’s solution is the only solution.

‘The impact of the tariff increase is not a one-size-fits-all [solution]. [But] if Eskom fails, we all fail. These are the key tenets that I think we should all take away from the Nersa hearings,” said Makwana.

Nersa will make its decision in February. - Sapa

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