There may be a glimmer of good news on the horizon for consumers. The National Energy Regulator of South Africa (Nersa) has raised its eyebrows at Eskom’s requested 53% hike in electricity tariffs. And if the total increase is granted, energy-intensive users could carry a large part of the burden.
In the draft consultation paper on Eskom’s request Nersa states that the tariff hike will result in a R12,7billion profit after tax for the utility. Nersa has asked stakeholders to comment on the ”necessity and adequacy” of this profit.
In interviews with Engineering News Nersa regulator for electricity Thembani Bukulu admitted to being shocked at the request, saying that there has been no similarly dramatic cost rise in Eskom’s primary energy inputs, such as coal.
Big business has arguably beneÂÂfited the most from Eskom’s dirt-cheap power. According to the 2006-2007 International Electricity Report & Cost Survey, produced by NUS Consulting Group, South Africa has the cheapest electricity in the world. Eskom charges 3,56 US cents per kWh for electricity to big industry. Our nearest rival is Canada, producing electricity at double our prices at 6,18c/kWh. Australia’s price is 7,11c/kWh.
South African big business is thus spending roughly a third of what it would have to pay in Australia on electricity. Australia, like South Africa, generates mostly coal-fired electricity and has a very active mining industry.
Industrial consumers in the Johannesburg area pay about 16c/kWh in summer, rising to about 23c/kWh in winter. Domestic consumers, meanwhile, pay between 33c and 43c/kWh, roughly double what industry does.
Nersa says a ”number of factors … influence the price of intensive energy users, like their contribution to … employment and GDP”.
Other experts say that hitting big industry with high tariffs is not the answer. Economist and chief executive of Pan-African Capital Holdings Dr Iraj Abedian says: ”If some industries are put out of business … the country will suffer accordingly.
”You go to Macro or any retailer, you get a discount if you buy bulk. Why not in electricity?
”Furthermore, the transmission cost to a bulk user is much cheaper than to a widespread, sparsely popuÂÂlated suburb, town or village. What we need to focus on is sustainable pricing by the generator [Eskom], not on who benefits.”
If the regulator agrees to Eskom’s request, however, it could spell the end to South Africa’s sweetheart electricity prices, especially for energy-intensive consumers. Nersa’s consultation paper suggests that such users could see a big rise in their electricity prices if the increase is applied ”cost reflectively”.
Eskom’s logic is that the requested increase is to pay for power generation and thus applies to ”the energy component of costs”. According to the utility, 70% of tariffs for small users pay for fixed network and customer service costs. ”Hence only 30% of the tariff component of small users would be subject to the proposed increases,” the paper says.
”In the case of large, energy-intensive users the network and services component of their tariff is small [less than 10%], resulting in much larger increases for these customer categories,” it says.
