General appreciation for revised tariff proposal

Wednesday, December 2, 2009

Pretoria - Eskom's revised tariff application has been widely appreciated amid concerns about the effects on the ordinary consumer.

Eskom yesterday asked the National Energy Regulator of SA (Nersa) for a 35 percent increase over three years instead of the 45 percent the power utility had proposed earlier.

Business Unity SA (Busa) welcomed the softer tariff hike request, but warned that the revised proposal would nevertheless undermine growth in a post-recessionary environment and push inflation to unacceptable levels.

The organisation said it was clear from recent SA Reserve Bank statements that electricity costs were playing a major role in preventing inflation from falling faster.

"Busa agrees that (a) new business model is needed for Eskom to promote competition and encourage alternative suppliers of electricity in a restructured electricity market," the organisation said.

The Department of Public Enterprises also welcomed the revised application, saying Eskom had to ensure that the impact of the increase on the poor, and small and medium enterprises would be mitigated.

"We are confident that the national energy regulator in making its final decision, will take all the proposals into consideration, including the country's future electricity supply requirements, and the need to ensure that Eskom is financially sustainable and operationally efficient," the department said.

The DA, Cosatu and the ANC appreciated the decrease but warned that it was still high.

They said there was no question that Eskom needed funding to expand its operational capacity, but debated if tariff hikes were the only solution.

The revised application will translate into a price increase of 43 cents per kilowatt hour next year, 55 cents per kilowatt hour in 2011-2012 and 70 cents per kilowatt hour in 2012-2013.

The reduction also means that Eskom will have to sell 30 percent of the new coal-fired Kusile station, the Sere wind project would also be phased by 12 months and the coal project (Coal 3) would be replaced by independent power producer projects.

Nuclear projects would also be delayed by 24 months.

However Nersa said the new tariff hike request was yet to be finalised.

Nersa still needs to hold public hearings and determine the kind of increase they will grant to Eskom.

The public hearings will be held between January 11 and 22 and a decision will be taken on February 24.