/ 19 May 2009

Consumer group calls on regulator to reject Eskom hike

The National Consumer Forum (NCF) will request the National Energy Regulator (Nersa) to reject Eskom’s proposed 34% price hike, the consumer body said on Tuesday.

”Eskom is now using contradictory arguments to push for more price increases, expecting consumers to keep paying more even while the economy shrinks, spending slows and jobs are lost,” said the NCF in a statement.

Its chairperson Thami Bolani said Eskom had this time last year argued that a positive economic climate — which caused unexpected growth in energy usage — was the reason for getting consumers to pay more.

”Now, Eskom wants another major hike in prices, but for precisely the opposite reason,” he said.

”They say they want a 34% increase because the economic climate has worsened. So we want to know if there are any economic conditions under which Eskom will not request unreasonable increases in electricity prices?”

In a worsening economic climate, demand fell and prices were supposed to drop, not increase, said Bolani.

”This has already happened in the coal market, where prices have halved over the past year, but why is this not reflected in Eskom’s plans and prices?”

The NCF cited the perilous financial situation in which many consumers now found themselves.

At least four out of every 10 credit-active consumers were over-indebted, according to a recent research.

This meant that 7,3-million consumers had judgements against them or were in arrears with repayments for more than three months.

”Can Eskom seriously consider adding its proposed increases to this picture of financial misery?” asked Bolani. ”Can it honestly propose an increase of triple the inflation rate, when consumers are facing current levels of financial hardship?”

He said the NCF would be urging Nersa to limit any Eskom increase to within the bounds of the inflation rate.

”The country as a whole — consumers and business alike — are required to live within the discipline of a contracting economy,” he said.

”How dare Eskom consider itself so different that it requires such preferential treatment?”

The NCF is an NGO that educates consumers about their rights, lobbies on consumer issues, and speaks out where it can on a range of challenges that consumers — especially lower income earners -experience in their daily lives.

Mboweni proposes ”once-off tax”
Meanwhile, Reserve Bank Governor Tito Mboweni on Tuesday proposed a ”once-off tax” rather than a tariff hike to help Eskom build capacity.

”I’m quite certain that if we took a vote here 100% of us would agree to a once-off tax just to build the capacity of Eskom.

As long as it was a once-off and not repeated again and again,” Mboweni told a conference of the Road Freight Association in Vanderbijlpark.

Mboweni said industrial policy and structural reforms were necessary for any nation’s recovery from the global economic crisis.

”In our case what we can do to develop the industrial zones that we have in this country?

”We shouldn’t forget those structural reforms which are necessary. Structural reforms can contribute to better competition and lower inflation,” said Mboweni.

”When my colleagues at Eskom say they would like to increase the energy tariffs by the kind of margin that they’re talking about it doesn’t help very much with structural reform.”

While Mboweni said he agreed more power capacity was needed, he added a tariff hike would not benefit the industry.

”None of us want to experience [Eskom’s power failures] again and somebody has to pay for the construction of the new capacity,” said Mboweni.

Eskom had proposed to increase its tariffs by 34% this year. The utility said the increase was necessary to build capacity to satisfy South Africa’s electricity demands.

Eskom spokesperson Fani Zulu said on Friday the utility would need R274-billion over the next three years. Of this, R141-billion would be provided by loans.

Zulu said Eskom’s current financial model only allows it to use tariff rates for running costs, not building capacity.

”Once it [a new financial model] is developed and implemented, we can apply for [a tariff hike, for] the full three years,” Zulu said.

He added that there was a ”strong consensus” that capacity building would be needed for economic growth.

”You can’t talk about growth and development without giving the necessary power supply,” said Zulu. — Sapa — Sapa