Sparks fly over Eskom tariff hike application

Nersa is holding a series of hearings across the country to gather responses to Eskom’s application for a general tariff hike of 19.9% and an increase of 27.5% for municipalities in the 2018-2019 financial year. File picture: Dean Hutton / Bloomberg

 

If Eskom did not offer affordable tariffs to consumers, the Nelson Mandela Bay Municipality would be forced to seek alternative energy sources for residents.

This is according to Nelson Mandela Bay mayor Athol Trollip, who spoke at a National Energy Regulator of South Africa (Nersa) public hearing in Port Elizabeth yesterday.

The regulator is holding a series of hearings across the country to gather responses to Eskom’s application for a general tariff hike of 19.9% and an increase of 27.5% for municipalities in the 2018-2019 financial year.

The hearings will end on November 16 and a decision is due on December 7.

If the hikes are approved, the general increase would take effect on April 1, with the municipal increase on July 1.

“The municipality is required by law to provide a safe, costeffective electricity supply,” Trollip said.

“The proposed Eskom increase jeopardises the municipality’s ability to achieve this mandate.

“We appeal to Eskom. If you want us to use your energy, then you must make it affordable. If it’s not affordable, our resilience planning requires us to find alternative sources.”

Trollip said there were a number of wind farms in the region that could provide energy to the city instead of Eskom.

“We have to seek and secure diversified electricity and energy provision,” he said.

“Once our customers experience Eskom’s supply as unaffordable, the natural path is away from traditional supply, either by tampering or using alternative sources.

“Either possibility will hurt our municipal revenue and ability to provide to previously disadvantaged communities.”

According to Trollip, the proposed increase would be unsustainable for both households and businesses.

“Ratepayers are probably already at their limit, and if industry is not competitive, businesses close down. General Motors has already left, and there will be others if we don’t [contain electricity costs].”

The hikes were met with criticism from various groups, who said they were simply unsustainable for businesses and farmers.

City manager Johann Mettler said big businesses could expect an increase of millions of rands in monthly electricity costs.

“The level of new investors will reduce drastically,” he said.

“The municipality projected for an increase of 8.3% and we propose a restriction along these lines.”

Others suggested reducing the increase in line with inflation. David Mertens, director of Autocast, in a presentation on behalf of the Nelson Mandela Bay Business Chamber, said: “Eskom’s application includes growth, but history indicates sales will drop, leaving us with a massive overcapacity.”

The Energy Intensive User Group of Southern Africa’s Xolani Mbanga said Eskom should only receive increases equal to inflation for the next few years. “This will force them to focus on efficiency and corporate governance,” he said.

Agri EC vice-chairman Wayman Kritzinger said: “Hefty tariff hikes can have an impact on food security and sustainability.

“Farmers are price takers, not price makers, which means flagrant costs cannot be passed on from us.”

Eskom group capital acting executive Peter Sebola said a large sum of this money would be spent to complete the Medupi and Kusile power plants.

“It doesn’t make cost-effective sense to stop the projects now, because we have contracts in place and we’ll have huge issues [and costs] if we try to halt construction. We might as well use the money to complete it.”

Eskom acting chief financial officer Calib Cassim said governance was also a priority.

“It is in our interest to restore the trust that has been lost in us,” he said.

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