Johannesburg - Electricity parastatal Eskom's proposed 35% hike each
year for three years will mean "serious pain" for the chemical
industry, the Chemical and Allied Industries Association (Caia)
said on Friday in Midrand.
It was addressing the final day of public hearings held by the
National Energy Regulator of SA (Nersa) on the power utility's tariff
application.
Lorraine Lotter, executive director of the Caia, told the hearing
that areas such as chlorine and fertiliser production would be hit
by a 35% tariff hike.
"There would certainly be big job losses in the fertiliser
industry," she said.
Lotter added that the strength of consumer demand had a direct
impact on the industry.
"Should the hike be 35%, then 769 000 people will move
under the poverty line and 841 000 would move under the ultra
poverty line," she said.
Approach 'inappropriate'
As the direct and indirect impacts on the industry would be
significant, the Caia had commissioned in partnership with
AngloGold Ashanti an analysis from Genesis Analytics to study
Eskom's application and to consider alternative funding models,
Lotter added.
James Hodge of Genesis Analytics told the hearing that Eskom's
approach to its funding for the next three years was inappropriate.
"They determine funding requirements for operations and new
capacity build and then justify tariff escalation to meet these,"
he said.
A more appropriate approach, he added, would be to determine the
true cost of supplying electricity from Eskom models through robust
analysis and then isolate the funding gap.
"Eskom should determine if some of the immediate funding gap can
be addressed through long-term project delays and non-Eskom
supply."
It must also determine the extent to which alternative funding
mechanisms were feasible and what portion of the funding gap they
could address.
He added he was convinced that the funding gap could be met
through means other than loading tariffs.
"Lower sustainable tariffs remain possible without introducing
further supply risks," he said.
Hodge requested that Nersa impose the onus on Eskom to improve
efficiency of generation and address challenges of bad debt and
theft.
Lotter told the hearing that the ultimate decision to be made
was how to balance the risk of poor security of supply against the
risk of significant negative socio-economic impact.
- Sapa