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FMF: SA needs independent grid

Nov 13 2012 14:42
Johannesburg - South Africa needs an independent operator in the electricity sector, the Free Market Foundation (FMF) said on Tuesday.

A single grid owner and operator, South Africa's current model, resulted in a lack of competition, FMF director Eustace Davie told reporters in Johannesburg.

This created the potential for excessive charges and difficulties in gaining access to the grid. A better scenario would see an independent system operator created to buy power from competing countries, said Davie.

Allowing Eskom to go ahead with its 16% tariff increase application would be disastrous for the economy, he said.

"There is a price tsunami that's about to hit the country, and it's going to carry on for four or five years."

Firms would close down because they could not afford electricity, he warned.

The FMF is a lobby group advocating for less government intervention in the economy.

Davie questioned figures contained in Eskom's latest multi-year price determination for the next five years (MYPD3).

The submission provided for a return to government of R186.8bn over the period, which the government should forego. Eskom's depreciation costs had also been calculated at the current replacement value of assets, rather than their historic value. This had added a further R279.5bn to Eskom's revenue requirements.

He questioned the need for R13bn to be spent on integrated demand management, a programme which, he said, included the cost of buying back power from large energy users.

"Independent experts, technical and financial, must interrogate the figures contained in the MYPD3," Davie said.

"The matter is too important to be decided upon without thorough investigation."
free market foundation


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