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South Africa: State Backs Eskom On 60 Percent Tariff Increase
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Business Day (Johannesburg)
20 March 2008
Posted to the web 20 March 2008
Siseko Njobeni
Johannesburg
THE government threw its weight behind power utility Eskom's proposal for a 60% increase in tariffs yesterday.
The g overnment's support for Eskom comes amid a groundswell of discontent over the proposal, and a sharp attack from the ruling African National Congress (ANC), which yesterday came out against what it called "unfair" tariff increases. The ANC called for Public Enterprises Minister Alec Erwin to intervene in the matter.
Last night the public enterprises department said: "In light of the sharp increases in fuel costs, specifically coal and diesel, and the need for the immediate implementation of an accelerated demand-side management programme, gov-ernment supports the principle of an electricity tariff increase to cater for these costs."
It said the increase Eskom had requested would not be used to fund the utility's multibillion-rand build programme "but is rather essential cash flow which will allow Eskom to deal prudently with the rise in the costs of primary energy inputs such as coal and diesel, for which the utility is now paying 25%-30% more than budgeted".
The money would also fund the accelerated demand-side management programme, a move to reduce consumption in order to reduce the pressure on the system, the department said.
The ANC came out against the increases. "The ANC is concerned that such a move, if implemented, would have adverse effects on the daily lives of the poor people of our country.
"We find it unfair that while Eskom has not demonstrated any ability in dealing adequately with the power crisis, they are eager to call for tariff hikes that would hit consumers hard in the pocket," the party said. It called on Erwin to "urgently" address the matter with Eskom.
The National Energy Regulator of SA (Nersa) said on Tuesday that Eskom had applied for a revision of the price for 2008-09 from a 14,2% to a 53% increase, or a 60% nominal increase. The regulator approved the 14,2% increase in December .
The South African Chamber of Commerce and Industry described Eskom's proposal as "very radical".
The body said the move would hamper business competitiveness and growth.
"This request by Eskom is far higher than the inflation rate.
"If granted, it would push inflation rates up and would be tantamount to fast forwarding this cost structure much, much ahead of projected inflation targets," it said.
Investment bank Lehman Brothers said that, if approved, the move would add two per-centage points to CPIX from July onwards, "pushing it over 10% -- and is therefore significant".
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The Congress of South African Trade Unions (Cosatu) and political parties the Independent Democrats , Democratic Alliance and Inkatha Freedom Party also joined the fray. Cosatu said, if approved, the increases would lead to a higher cost of living, make electricity inaccessible to poorer consumers and threaten thousands of jobs.
The public enterprises department said Eskom's proposal included measures to keep the increase below 60% for low-income households and small businesses.
A "time of use" tariff structure would, where possible, help small enterprises, Eskom said.
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