Eskom tariff blow may be softened

Any increase in electricity prices should occur gradually over five years, Eskom was told on Friday at a summit in Sandton on the electricity crisis, South African Broadcasting Corporation (SABC) news reported.

The government, labour, the African National Congress (ANC) and community forums were represented at the summit.

Eskom, which produces about 95% the country’s electricity, is rationing power in response to a supply shortage that has led to regular and widespread blackouts and sent a chill through industry and investors.

Power failures in January forced large gold and platinum mines to shut down for five days, pushing world precious metal prices higher. The mines are now operating at 90% to 95% of their normal electricity supply.

As part of its bid to tackle the crisis and fund a R350-billion infrastructure expansion, Eskom has requested a revised 53% increase in electricity tariffs for 2008 and 2009.
It had previously received a 14,2% hike.

On Friday, however, Eskom and municipalities were told to protect the poor from the effects of the tariff increases and that any increases should be more “poor-sensitive”. The increases will not be introduced in one massive hike, but rather be phased in over five years to reduce their negative impact.

“We are convinced that the economy cannot afford that sharp increase in electricity prices,” ANC secretary general Gwede Mantashe said, adding that it would be wrong for Eskom to use price rises to recover from past losses.

Minerals and Energy Affairs Minister Buyelwa Sonjica said electricity price increases must be treated with sensitivity.

“It is a fact that electricity cannot be treated as another commodity; it is a key input into our economy and is a basic need for most households. Any price increase therefore is to be treated with sensitivity and subjected to consultation with all the affected stakeholders.”

The Congress of South African Trade Unions general secretary Zwelinzima Vavi said it pained him to say that they accepted that an increase was necessary. “But we can’t simply write a blank cheque for Eskom because they are telling us their costs are rising.”

Eskom will now resubmit its application on the proposed tariff hikes to the National Energy Regulator of South Africa (Nersa).

The summit delegates also determined that the government should pump more money into Eskom to maintain its financial health and credit rating.

The summit appointed Mantashe, Vavi, the South African Communist Party’s Blade Nzimande and Public Enterprises Minister Alec Erwin, among others, to meet urgently and agree on the appropriate tariff increases to be spread over five years.

Nersa will be briefed on the outcome of the summit on Tuesday next week. Members of the public can voice their opinions at Nersa’s public hearings next Friday, the SABC reported.—Sapa, Reuters

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