Poor S Africans could see increase of free electricity

Tuesday, October 13, 2009

Johannesburg - Poor South Africans could receive 70 kilowatts worth of free electricity if Eskom is granted a 45 percent "smoothed" tariff increase, says it's Chief Executive Jacob Maroga.

"We recommend that it be increased to 70 kilowatts and that the cost be carried by industry," Maroga told reporters as the parastatal unveiled details of its Multi-Year Price Determination 2 (MYPD 2) for the three-year period, beginning in 2010 to 2013.

This, he said, would limit the impact of the increase on poor households that currently received 50 kilowatts free basic electricity from government.

"This is the beginning of consultation and it will take some time," said Maroga, adding that government has been consulted on the matter.

"We are still in a process for things to be endorsed," he said, adding that public hearings were still to be held.

The parastal said it was in favour of a 45 percent annual tariff increase from next year until 2013 as opposed to once off 146 percent tariff increase. The 45 percent will result in a 30 billion shortfall and will involve an increase of 22 cents/KWPW.

"We know the shortfall of R30 billion; we are committed to closing it," said Maroga.

According to the utility, South Africa has been using cheap electricity for far too long and that in order for the economy to grow and to keep electricity running, an increase is necessary.

"The challenge is that tariffs are too low. We need to move to sustainable tariffs.

"Power is the central element to the economy. We want to see a thriving economy, the provision of power is like oxygen to the economy," he explained, adding that Eskom's expansion serves to provide power to future generations as well as to stimulate the economy.

Expanding the utility's infrastructure, Maroga stressed, will result in confidence that will draw investors to South Africa, adding that by 2020, South Africa will need an additional 20 000 megawatts of power.

Eskom's biggest cost in primary energy is coal, of which prices have been escalating, for example, due to transporting coal by road. Another cost driver was human capital as well as the maintenance of the utility's fleet and the new build programme pertaining to projects like Medupi and Kusile.

Describing it as "painful but necessary" Maroga said the proposed increment if granted to the utility will be implemented by April 2010 while municipal customers would start paying by July 2010.

"We expect a decision [from Nersa] by early next year," said Maroga.

Eskom further added that it is in favour of bringing in independent power producers.