Wide acclaim for reduced Eskom hike

Feb 28 2013 18:32

Johannesburg - Wide acclaim has greeted a move by the National Energy Regulator of SA (Nersa) to limit an electricity tariff hike to 8% over the next five years.

The decision was welcomed by, among others, the Federation of Unions of SA (Fedusa),  Agri SA,  the Democratic Alliance, the Inkatha Freedom Party, Western Cape Finance MEC Alan Winde, and the Manufacturing Circle.

Eskom, which had applied for a 16% increase each year for the next five years, said Nersa's decision could present difficulties.


Announcing the decision, Nersa chairperson Cecilia Khuzwayo said it was "based on facts".

"The third multi-year price determination [MYPD3] will be 8% over the next five years," she said.

The increase Eskom had sought would have more than doubled the current price, taking it from 61 cents a kilowatt hour in 2012/13, to 128 cents a kWh in 2017/18.

As a result of Nersa's decision, the price will increase from 65.51 cents a kWh in 2013/14 to 89.13 cents a kWh in 2018.

This meant the total revenue approved for the five-year period amounted to R906m.

In reaching that amount, Nersa had conducted a detailed analysis of Eskom's application, and had followed due process by holding public discussions on the tariffs.

"Our challenge... has been and still remains regulating the energy sector in the manner that balances the interests of energy producers on one hand and consumers on the other hand," she said.

Eskom  responds

Eskom spokesperson Hillary Joffe said the parastatal would study the decision.

"We have noted the decision and it will present a challenge for Eskom," she said, adding that Eskom would try to keep the country's lights on.

"We will now be looking at how we can meet this challenge," she said.

Eskom later said in a statement the new tariffs would take effect on April 1 for Eskom customers and on July 1 for municipal customers.

Can Eskom appeal?

Nersa electricity subcommittee chairperson Thembani Bukula said the 8% increase was sufficient for Eskom to fulfil its obligations.

"Our function is not to run Eskom into the ground."

He said the decision on tariffs had been made independently of Eskom.

"No, we did not speak to Eskom. We tell them what the decision is," he said in a response to a question.

Asked whether Eskom could appeal Nersa's decision, Bukula said legislation allowed for the parastatal to approach the high court, if necessary.


TAU SA president Louis Meintjes said the tariffs represented an increase in farmers' monthly accounts.

"If government is not going to consider ways and means to support the producers, the South African population is indeed facing a bleak future," he said.


Fedusa general secretary Dennis George said the decreased rate would affect inflation.

"We welcome the 8% increase.... Although the increase will still be felt by working people, we feel that this is much better than the 16% requested by Eskom."

Agri SA

Agri SA president Johannes Mller said the new tariffs were "realistic".

"This will be conducive towards creating a more certain business environment in South Africa," he said.


It was to be welcomed that Nersa had taken into account submissions made by business during public hearings on the increases, said Business Unity SA (Busa).

"The excessively steep rises in electricity tariffs in recent years have been damaging to growth and employment," Busa special policy adviser Raymond Parsons said in a statement.

"[The increases have] raised the costs of doing business, and have put many business enterprises at risk."

Parsons  said the debate surrounding Eskom's latest tariff application again highlighted the need for more competition in the energy sector.

Political responses

DA MP Lance Greyling said the decrease was a step in the right direction for the government. "We call on Eskom to act responsibly and take the initiative in finding other funding models and policies that will assist in generating more cost-effective energy."

IFP  MP Mario Oriani-Ambrosini applauded Nersa for resisting pressure from Eskom to accept the 16% increase.

Western Cape Finance MEC Alan Winde said Eskom needed to look at innovative ways of producing electricity.

"We expect that between 40% and 50% of wind power projects in South Africa and 15% of solar energy projects will be set up in the Western Cape by 2014, to provide for about 10% of our region's energy needs."

Manufacturing Circle

Manufacturing Circle spokesperson Coenraad Bezuidenhout said the tariffs were a "tremendous relief to manufacturers".

"It is a good decision that will support the maintenance of the manufacturing base,  that will contain inflation and ensure a better future for South Africa."


Greenpeace Africa said the increase did not include the government's new proposed carbon tax, or the negatives associated with coal-fired electricity generation, including its effect on health and water shortages.

"The National Energy Regulator of SA (Nersa) must hold Eskom accountable for the utility’s continued investments in coal," Greenpeace climate and energy campaigner Ruth Mhlanga said in a statement.

"In addition, investing in nuclear [power] as proposed by the department of energy, would drive the price of electricity even higher than the figures included in Eskom’s tariff increase application."

Greenpeace believed greater investment in renewable energy was urgently required to transition South Africa to a low carbon economy, free from coal-power pollution and the dangers of nuclear power.

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greenpeace africa  |  da  |  tau sa  |  busa  |  agri sa  |  eskom  |  ifp  |  fedusa  |  nersa  |  electricity tariff hike



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