/ 25 February 2010

Eskom: ‘Positives outweigh negatives,’ says minister

It is necessary to look at the National Energy Regulator of South Africa’s (Nersa) decision on Eskom’s tariffs in the context of the possibilities it creates, rather than the negatives that could result, Energy Minister Dipuo Peters said on Thursday.

“While steep increases in electricity tariffs are not desirable, we believe that the positives of this decision outweigh the negatives,” she told a media briefing at Parliament.

She was responding to Nersa’s announcement on Wednesday that it was granting the power utility a 24,8% tariff increase for 2010, 25,8% for 2011 and 25,9% for 2012, and the anger following the announcement.

Peters said without energy security, the levels of economic activity necessary to create new jobs could not be achieved.

“It has been almost 20 years since we commissioned the last base-load power station as a country, and our electricity supply-demand balance remains precarious as we enter 2010.

“The need for new capital investment in the sector is beyond debate and inevitably this exerts upward pressure on tariffs,” she said.

Eskom’s wholesale tariff was renowned for being below an economically sustainable level, leading to an economy that was wasteful and not energy-savvy.

While this had been a key aspect of industrial policy in the past, it was necessary to ensure efficient recovery of the cost related to providing power to the sector that was largely responsible for driving the demand.

“The time has now come to consider energy intensity in the relative context of the jobs that we can create, in comparison to other less energy-intensive industries.

“The days of a country with the lowest price and abundant power that we took for granted are behind us,” Peters said.

Protecting the vulnerable in society
Nersa’s decision was aligned with the government’s policy objective of protecting the vulnerable in society, by providing an inclining block tariff structure for municipalities and also capping the increases for this sector.

“For example, if you use more than 600 units per month then you are liable to pay a higher charge as a domestic user.

“We implore municipalities to keep the increases for the domestic sector in alignment with the Nersa determination — the domestic sector should not experience any increase above 15%.

“While the average tariff will rise by about 25% over [three years], this is not the case for domestic users, because the increase will be below that,” she said.

On diversifying the energy mix, Peters said rather than continuing to build more coal-fired power stations, it had become critical to exploit the upside due to energy-efficiency interventions in the sector, and the Nersa determination had given this opportunity fresh impetus.

Currently, there was about 400MW of electricity potential that could be harnessed from cogeneration with the likes of sugar, paper, and petro-chemical industries, which had traditionally been discarded, given the cheap price of electricity.

Renewable energy and the practical manifestation of the government’s goal to generate about 5% of electricity from clean sources would also get a new boost as tariffs increased, creating even more jobs opportunities, Peters said. — Sapa