Power cuts here to stay?

Power cuts may still be a reality for South Africans, despite sharp electricity price hikes, the National Energy Regulator of South Africa (Nersa) has said.

“The 24,8 % increase is determined based on some assumptions regarding the demand, Eskom’s ability to raise funding through loans, the demand-side management reaction and others. These assumptions may or may not materialise. If they don’t, the risk of power cuts increases,” Nersa spokesperson Charles Hlebela told the Mail & Guardian.

Eskom originally requested a 45% per year increase until 2013 to help prevent blackouts in the country. After an outcry, the embattled power utility brought the figure down to 35%, and said there would be shortfall of R40-billion.

Last Wednesday, Nersa granted Eskom an average tariff increase of 24,8%, 25,8% and 25,9% over the next three years, leaving a reported shortfall of R75-billion.

Load-shedding became a reviled and familiar phrase for South Africans from April 2008 when Eskom instituted regular electricity rationing at set intervals, as poor planning led to an energy crisis and power cuts across the country. The current price hikes, which could see a large household’s costs triple in three years’ time, were meant to curb the risk of power cuts.

Value for money?
While the hikes have not been well received, economist Dawie Roodt said it was important to send the right message about the value of our power. “Electricity is a scare commodity and it should be properly priced,” he said.

A large household currently paying R2 000 a month for electricity can expect its bill to triple to about R6 000 in three years’ time, as households that use more than 600kWh a month will see increases of 35,8%, 25,8% and 25,9%, coupled with municipality increases of 15,3%, 16% and 16%, the M&G reported on Friday.

The increases will hurt all but the poorest households, as according to Eskom the average domestic home uses 1 572kWh a month. Low-usage households, those that use below 50kWh a month, will see a 10,5% reduction next year, followed by a 5% increase over the following two years, meaning little change over the next three years.

But even if you pay less for electricity you will not be spared from the impact the hike will have on the economy. “We will feel the impact on inflation, higher prices and job losses,” warned Roodt.

He maintained that, although difficult to compare with other countries, South Africa’s electricity prices still remain on the low side. Yet some South Africans still won’t be able to foot the new bill.

“It is likely that more people won’t be able to pay. Factories, mines and other business may close down,” predicted Roodt.

Eskom’s power problems
Eskom’s power problems were predicted as far back as 1998. The White Paper on the Energy Policy of South Africa had Eskom warning that its surplus capacity would be fully used by 2007. The report even had a signature by then-energy minister Penuell Maduna.

Unbeknown to Eskom, the crisis would start even earlier. In 2005, then-public enterprises minister Alec Erwin assured South Africa that there was no national power crisis despite the numerous power cuts that began to run through the country.

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