Fin24

Why Eskom wants 16% price hike

2012-10-22 16:05

Johannesburg - Eskom has asked for a 16% increase in electricity prices each year for the next five years, the parastatal said on Monday.

"We seek to ensure that Eskom can cover the costs of supplying the electricity needed to power South Africa and invest in the future," CEO Brian Dames said in Johannesburg.

This would take the price of electricity from 61 cents a kilowatt hour in 2012/13 to 128 cents a kWh in 2017/18 - a more than 50% increase over five years.

The 16% increase was broken down into a 13% increase for Eskom's own needs and 3% for the introduction of Independent Power Producers (IPPs).

The IPPs would be responsible for the first large scale introduction of renewable energy into South Africa.

Electricity had been charged at below reflective costs and this was not sustainable.

"Our application balances South Africa's needs for a secure supply of power and for a sustainable electricity industry, with our recognition of the impact which tariff increases have on the economy, particularly on the poor," Dames said.

Eskom submitted its application for the increases to the National Energy Regulator of SA (Nersa) on Friday.

The current Multi-Year Price Determination, MYPD2, ends on March 31, 2013.

Nersa will announce its final decision in February, following an extended period of consultation and public hearings.

"This is the start of a process. This is not a decision. A decision will be made by the regulator," Dames said.

The application proposed a price-path which migrated electricity prices towards a level where they covered the full cost of producing electricity.

This would include operating costs, such as coal, maintenance and employees, and the cost of servicing the debt raised to finance Eskom's new build programme of R337bn over the five years.

Dames said coal made up 56% of Eskom's primary energy costs.

The price of coal had been increasing far above inflation due to ageing mines and growing competition for South Africa coal.

Dames called for a country pact to contain coal cost increases to no more than 10% a year.

Eskom's application proposed a tariff structure to cross-subsidise poor households that used little electricity. In terms of this, these households would get single digit price increases.

Dames said the parastatal would apply to Nersa this week to review a special pricing agreement it was tied into with Australian miner BHP Billiton for its aluminium smelters in KwaZulu-Natal.

"The special pricing agreements link the price the smelters pay for electricity to the dollar price of aluminium and were entered into in the 1990s when Eskom had surplus generating capacity, which is no longer the case."

As the terms of the deal are secret, it is not known how much BHP Billiton pays for electricity, but it is estimated to be below cost.

In contrast to the MYPD 1 and MYPD 2, which both spanned three years, Eskom was now proposing a five-year determination for MYPD 3 to ensure a predictable, longer-term price path.

The Democratic Alliance objected to the price increases.

"I will meet with the regulator, Thembani Bukula, this week to urge Nersa not to accept Eskom's proposals," said DA MP David Ross in a statement.

"We will continue our calls for an alternative pricing model in which consumers and businesses are not made to pay for inefficient capital expenditure programmes by a monopolistic state-owned energy provider."

      

Comments
  • fahim.gutta - 2012-10-22 16:18

    Start doing your jobs and monitor the thousands of crooks who are gippo-ing their prepaid meters. The meter readers get bribed R50 to turn a blind eye when inspecting prepaid meters so if that revenue were added up, would Eskom need a double digit increase. People dont pay a cent for electricity by cheating their meter for years and Eskom are still too dumb to catch them.

      bruno.samsung.50 - 2012-10-22 16:45

      Dear Nersa Please grant Eskom -5% p.a. for the next 5 years.

      alexander.lombard - 2012-10-22 16:45

      This would take the price of electricity from 61 cents a kilowatt hour in 2012/13 to 128 cents a kWh in 2017/18 - a more than 50% increase over five years. WHO DIT THE BS MATHS. this is over 100% hike

      customdesign - 2012-10-22 17:03

      It's 16% compounded interest over 5 years, not just 80% interest. So for example on R100, 16% compounded over 5 years will be R208 - a 108% increase.

      sedick.gydien - 2012-10-22 18:41

      I wish I had a company and could increase my selling price because I would like to upgrade my factory, AND give me another 3% so that I can help my competitors build their factories so that they can also screw my customers - and not lose customers.!!! Where in the world does this happen? Oh yes, only in ANC land!!!!!

      sedick.gydien - 2012-10-22 18:45

      AND TO CROWN IT ALL, I then ask my supplier (Coal suppliers) to limit their increases to 10%. Dames, you may take some people for asses, but not all.......

      lacrimose.wolf - 2012-10-22 19:52

      We need a Fin24 article as to why Eskom should not get a 16% hike. Why do producers and manufrs always get their hikes but employees do not? We are paying 1st world prices on an emerging-market (ever-dwindling) income.

      frank.vankaapstad - 2012-10-22 20:11

      Wages go up, electricity goes up, cost of food goes up...INFLATION INFLATION INFLATION! South Africa is catching up to Europe in terms of living costs. People will soon find they cannot survive on their current wages and the next round of strikes will begin. I really foresee a lot of turmoil over the next few years.

      heathway.master - 2012-10-23 10:35

      As only 10% of the population bother to pay for electricity, they work out their annual costs, and then divide it up amongst those honest enough to pay. My suggestion is why doesn’t Eskom reduce its horrendous employee costs and obscene managers bonuses by 10%, and increase electricity costs to the consumers by 6%. The number of idle loafers at Eskom, must in my opinion, be gigantic.

  • bruce.williams.1044186 - 2012-10-22 16:23

    Ridiculous!! Everything keeps getting more expensive!

  • sisie.indola - 2012-10-22 16:27

    Before you increase the tariffs, why don't you disconnect all illegal connection in the squatter camps - oh but you need their votes so they are what - untouchables?

      aspruyt - 2012-10-22 16:46

      My thoughts exactly. And a 50% increase HAHAHA total over five years? Whomever did that maths must be a Limpopo matric learner with no textbook! id10ts. 61 * X = 128 X = 2.09836 So that is just over a 100% increase over 5 years!

      aspruyt - 2012-10-22 16:47

      My thoughts exactly. And a 50% increase HAHAHA total over five years? Whomever did that maths must be a Limpopo matric learner with no textbook! id10ts. 61 * X = 128 X = 2.09836 Which shows us it has doubled pretty much. So that is just over a 100% increase over 5 years!

      susanna.smit.7 - 2012-10-22 19:55

      Their power is never cut, since the copper cables get stolen when that happens.

  • Marcel Marais - 2012-10-22 16:28

    this is grate some days we don't even have power but now thy want us to pay more I say we can pay more when they do there job!

  • goyougoodthing - 2012-10-22 16:28

    Firstly, I am not quite sure how from 61 to 128 is 50% more. Secondly, in Durban we pay 112c, Ethekweni then must take the rest. For what? AND we all pay VAT on top of this? Why?

      fanie.gerber1972 - 2012-10-22 16:34

      Point of view: from the 128 side it is 47.6% more, but in reality it is 109% more. old BS salesman trick

  • desmond.clarkhalket - 2012-10-22 16:30

    mark my words. they ask for 16% and then the big furore. Cosato cries foul. everybody settles for 10% what they actually wanted right from the start and the public thinks they won the battle

  • Phindile Manganyi - 2012-10-22 16:30

    Okay lets all stop using electricity once and for all if this is how citizens should pay for people's ridiculous salaries and bonuses

  • rvbrink - 2012-10-22 16:31

    The article states that is a 50% increase but in fact it is more tha 100% incease. Who is trying to fool us????

  • mcedise.l.buhlungu - 2012-10-22 16:38

    It seems Eskom forgets that money does not grow on trees. We are still reeling from the increases they imposed upon up earlier. Their power blackouts cost us the money that they want us to cough up for their blunders. Come up with a better solution Eskom. You're killing us!

  • trevor.pietersen.3 - 2012-10-22 16:38

    So that the GOVERMENT gets more VAT....THATS WHY...

  • BigChiefPlumbPudding - 2012-10-22 16:45

    Less increases, less bonus, less meetings and seminars in exotic places. Whilst the rest of the country is trying to keep costs down and tighten their belts, Eskom resorts to an extortion type demand. Cut back on your expenditure like everyone else and you will not need to apply the increase. Enough with the Gravy Train please.

  • lerato.kay.3 - 2012-10-22 16:52

    Where do they get the 128 cents a kWh in 2017/18 when I'm currently paying more than 128 already! Eskom must come out clean, they are screwing us big time.

  • tamlin.vanheerver - 2012-10-22 16:57

    Ironic that the coal mines now hold the SA public to randsom, they know we need the electricity so they can in turn blackmail us on the price of coal... oh and guess who owns those coal mines?! Typical corrupt country.

  • WarrenStylin - 2012-10-22 16:58

    They are holding the country ransom as they are a Monopoly. They pay their bosses and owners Millions in bonuses alone. If they took those bonuses over 3 years that would cover the cost of a power station.

  • rob.vine.9 - 2012-10-22 16:59

    This is so the big guns at Eskom can get these nice big bounse's again and we can still get power out every now and again

  • arthur.salvado - 2012-10-22 17:00

    Hey guys, where do you think they get money to pay ridiculous bonuses and replace stolen money. You guessed it. First get bailout from tax payers money and/ or increase prices. Not too difficult then is it? We just stupid to accept whatever this government imposes upon us. Reminds me of the Roman Empire .......it's coming

  • giancarlo.groenewald - 2012-10-22 17:01

    Eskom should stop being gay and let people that have their own solar systems be able to provide power to the grid, and then it opens the doors up for entrepreneurship as well as people then can get paid for the amount of power they put into the grid.

  • lmapheto - 2012-10-22 17:09

    Why does eskom need a ceo of all of them use the same solution (consumer price hikes)? so we pay you to pick pocket us? I cant believe i am even hearing this boloko...cant you think further than making your money from hard working citizens? Commercialise or shucks by the way they are shareholders in most of the industries were you could be making your profits...but at least propose it Dames...no man

  • Gavin Wait - 2012-10-22 17:10

    I am glad someone picked up that it is more than 100% increase, and not the 50% they say. Either the person writing the article cannot do simple maths, or it is propoganda to mislead us. I am also currently paying 125 cents a KWh. So where is the rest of the money going?

  • angelene.pinfoldmammone - 2012-10-22 17:14

    As long as millions of townships and squatter camps keep stealing electricity there will be no end to this!! DISCONNECT THE BASTARDS OR ARE YOU STUPID ESKOM????

  • Gill McCain - 2012-10-22 17:20

    Hey Eskom, wake up - you can't get blood from a stone. We have no more money for you!

  • martin.venter.948 - 2012-10-22 17:22

    61c ???????? After municipalities had their share plus the sliding tariff scale, the average price is much closer to 120c for an average household ! On which planet are these prices based ?

      tumelo.makhudu - 2012-10-22 17:35

      who knows but Xcom

  • tumelo.makhudu - 2012-10-22 17:32

    mmmmh ja neh' eskom is a private company too bad for you and me

  • rajesh.sukha - 2012-10-22 17:36

    Charge Arcellor Mittal the right price and we won't need to see such high increases form the average south african.

  • larry.piggott1 - 2012-10-22 17:44

    What a load of rubbish.First start with the cost of construction. Its more than twice the norm because of corruption, then there is the incompetent maintenance of the system, then there is the bunch of useless cadres attempting to run the show, at hugely inflated salaries that even genuine professionals could only dream of.

  • gerrit.vanpletzen - 2012-10-22 18:15

    Oh no, it's not about what they can do for the consumer, it's about what salary increases, sports days, travel expenses, etc they would be able to afford. Escom, we know you by now. Do not insult us with your lies about the amount of the increase. Us old people can still do the math instantly, without calculators.

  • lhensby - 2012-10-22 18:28

    If ever person pays for the electricity they use there would be no need for this mad increase. As usual the honest hard working people of S.A. Suffer!

  • mxeki.maduvula - 2012-10-22 18:30

    You can achieve your objective if you can curb the illegal connections in the townships and slum areas rather that to practice daylight robbery upon the poor citizens!

  • mthokozisi.mbele - 2012-10-22 18:54

    why don't they just ask 4 50% increase in one thereafter low it to d original rate

  • john.kilian.96 - 2012-10-22 19:41

    Recent economic reports indicate that SA is the second highest tax country in the world with low income earners paying 50 percent overall, middle income 65percent and high income earners 75 percent . Eskom and the ANC and all other government depts continue to kill the golden goose that lays the golden egg, namely the taxable employed.

      lacrimose.wolf - 2012-10-22 19:53

      We're not geese any more. We're lambs to the slaughter

  • anakin.skyvader.9 - 2012-10-22 20:26

    Ok here are SOME of my questions: 1. How much does Eskom's EXPORT clients pay in cents/kWh? 2. How much does the aliminium smelters pay in cents/kWh? 3. Will both of the above customers also be subjected to the same tariff ratio increases or will theirs just 'conveniently' stay the same? 4. Will the subsidies on solar geysers be adjusted/re-instated and by how much? 5. When will ESKOM roll out smart remote-controlled tamper-proof prepaid connection 'boxes' to guard against theft and inaccurate readings? 6. Why continue with meter-readers? It's old-fashioned and outdated. It should be done electronically by radio-links or linked with LAN's. 7. What are the cost breakdowns for the Medupi power plant, as costs keep on increasing and increasing for this project?

  • gift.rode - 2012-10-23 08:06

    Why can't they take the money they are going to use on useless projects like the nkandla one and give it to eskom we are already paying a lot on other essentials and tax its even expensive to die in this country

  • franky.hartzenberg - 2012-10-23 08:42

    start with management salaries and bonuses and perks. The perks normal eskom workers get you dont even get working for goverment.

  • winifred.watson.9 - 2012-10-23 09:27

    What is eskom trying to do. People dont even get that amount increase in their salaries every year. Just now people wont be able to afford electricity. I am a pensioner living off my investment, I have had my income shredded that we are hardly making ends meet, our electricity has more than doubled now what are we going to do when this increase goes through. Old people are not looked after in this country, look at the meagre R10-00 increase the government pensioners got, a drop in the ocean. Fortunately, I am not in their shoes, YET, but soon will be there. Its time for government to do their sums, eskom must also cut back, no more expensive parties etc pump that money back into their account. This country is killing us. Business must also be feeling the effect, here you have people striking for more wages and they dont have a clue what the poor business man's overheads are. Time to educate the workers, if Unions want to stay, make them more responsible make them educate their members on business fundermentals.

  • rudi.debeer.5 - 2012-10-23 11:17

    I can not understand how consumers fund capital expansion without becoming shareholders?

  • alan.davis.5249 - 2012-10-23 11:18

    This increase is for the overpaid executives as a bonus for crippling the economy, How much is 16% on the CEO's R6.4 million salary? Most people don't get that as a yearly salary!

  • heinrich.spreeth - 2012-10-23 12:17

    Where does the 61c come from???? My eskom bill states: (rounded to closest c) 50kwh 350 600kWh R1.19 I used 755 units last month and then my bill comes to R723.67 (ex vat)

      heinrich.spreeth - 2012-10-23 12:19

      50kwh 0.57 50 to 350kwh 0.72 350 to 600kwh 1.08 600+ 1.19

  • hugo.mcdonald.7 - 2012-10-23 12:30

    Why does the consumer have to pay the 3% for the independents as well as the 13% on the electricity bought with the 3% from the independents?!?!? I must be too stupid to understand this...

  • brent.bartlett.98 - 2012-11-13 13:12

    Yes and now I need a 16% pay rise every year for the next five years to pay my electricity bill.

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