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South Africa: Household Electricity 'Too Pricey'
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Business Day (Johannesburg)
25 April 2008
Posted to the web 25 April 2008
Siseko Njobeni
Johannesburg
HOUSEHOLDS have borne electricity price increases in excess of inflation for the past 11 years, while Eskom sold power to industrial and international customers at below cost , economist Mike Schussler said yesterday.
Schussler's statement, at a conference in Tshwane to discuss the implications of the electricity supply shortage, is likely to harden public attitudes to Eskom's request for a 53% increase in electricity tariffs. The National Energy Regulator of SA (Nersa) is to hold public hearings on Eskom's application next month.
Schussler said between 1996 and last year the residential sector had the highest increases in electricity prices, with the hikes outstripping inflation.
"Household electricity prices for metropolitan areas went up by 9,8% over the last year ended February 2008, according to Statistics SA . Consumers in SA not only subsidise the poorer households, but also industry, as the PPI (producer price index) for electricity is up only 7,7%."
Schussler said in the past 11 years the increase in electricity tariffs for industrial, agricultural, mining and commercial customers had been below inflation.
If Eskom's application for tariff increases was approved, South African households would have among the most expensive electricity in the world.
Schussler also shot down the long-held argument that SA had the cheapest electricity in the world. In order to support that view, "a carefully selected" group of industrial countries was used for comparison, instead of other developing countries.
If the 53% increase was granted, middle class households would pay 10,06c a kWh, compared to an international average of 10,68c a kWh. "But the emerging market country average is only 8,57c a kWh," Schussler said.
A 100% increase would push up costs for local households to 11,8c/kWh, higher than the international average, he said.
Schussler said Eskom sold electricity to neighbouring countries cheaply. "The average Eskom residential tariffs are 274% higher than those charged by Eskom for power to our neighbours.
For more than 11 years Eskom has sold electricity at below cost to international customers. The absolute loss over this period is R3,3bn."
He said 33,6% of Eskom's electricity was sold below the cost of production.
The trade union Solidarity, which organised the conference, said it would ask Nersa not to increase domestic electricity rates by more than the inflation rate. CPIX is at a new five-year high of 10,1%.
Energy consultant Andrew Kenny heaped blame for the electricity supply shortages on Eskom and the government. He told the conference the government and the power utility had failed to build power stations "when it was obvious that we need them".
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He said the electricity supply shortage was unnecessary and avoidable. "We could see it coming 10 years ago,"
Earlier this year, President Thabo Mbeki apologised for the government's failure to approve the building of additional power stations in time.
Attempts to contact Eskom for comment yesterday were unsuccessful.
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