The Herald article, “Green energy on the rise” (February 5), surely needs some further and urgent clarification.
While we are all in favour of green energy and the reduction of greenhouse gases, the costs adhered to it must be transparent and properly presented to the users.
In the proposed system presented in the article, the financial advantages are completely misrepresented and the average Nelson Mandela Bay electricity user needs to be made aware this system will cost him a significant amount of money if fully implemented.
In the article, the municipality presents the system as having financial advantages to electricity users in the NMBM. Certainly some users such as Spar might think they will save some money in the short term, but eventually for all of us electricity users, the presented system will become a costly affair.
Here is how it works. The municipality used to buy all its electricity from Eskom, and then distribute and sell it on to us, the users in NMB. For this distribution, the municipality could charge distribution costs.
It is well known to us that the municipality now levies a substantial mark-up on the selling of electricity, meaning that on every kilowatt hour (kWh) of electricity we buy, some “profit” is being made. This money is used to provide services other than the ones related to the electricity department and should be considered as a factual taxation.
To clarify with some numbers, the municipality buys power from Eskom at about 60c/kWh and sells it on at about R1.10. The 50c then covers the distribution cost and the “surplus” generated out of this is an upside for the municipality.
Surpluses of more than R300-million per year have been common these last few years. The municipality has always argued that this surplus is required to run the municipality, so it is something it claims it needs to serve our community.
Now let’s have a look at how the presented “green energy scenario” impacts us all. The municipality signed a 20-year(!) contract with Amatola Green Power, allowing it to “wheel” up to 10% of this municipality’s usage into the NMBM power grid.
This means that the NMBM will buy only a minimum 90% of its supply from Eskom, the rest can be supplied by Amatola Green Power that will use the NMBM infrastructure and services, including all municipal personnel, to sell directly to specific customers. These selected customers get electricity marginally cheaper, a few percentage points below the municipality’s tariffs.
The NMBM will, according to the contract, get 3% to 7% of its normal selling price from Amatola to provide this service and this is exactly where the problem is. From Eskom, the municipality gets a mark-up of approximately 50c/kWh, from Amatola, the factual mark-up becomes 8c/kWh at best.
If you then realise Amatola can wheel 10% of the NMB’s usage, the potential annual loss of income to the municipality becomes of the order of R100-million per year. Note that in this proposal, being presented as financially advantageous, the municipality factually buys electricity from Amatola at more than 95c per kWh, while it can buy it from Eskom at 60c.
So the so-called “cheaper” green energy is in fact much more expensive than what Eskom is supplying us and a non-competitive supplier is allowed to come into the market for the next 20 years! As the municipality desperately needs income while it is actually losing income through this contract, the municipality, given its ongoing financial constraints, will have to find revenue now being lost to Amatola somewhere else.
The obvious thing to do would be, as you could have guessed, to increase the mark-up on electricity even further! To quantify it, the lost income as a result of the Amatola contract will potentially cost you about 4c/Kwh.
For Spar, that has entered into this apparently attractive deal, please be aware Amatola is allowed to charge this increase through as well when the next increase is due! With all respect to Justin Walton from Spar, who is so chuffed about “getting money for jam”, he must realise his upside comes at the expense of the rest of the electricity users in Nelson Mandela Bay and he will also end up paying more than he should have paid.
What we need is a transparent and effective green energy industry which really helps us forward and helps everybody in the community. It cannot be a programme which benefits a few chosen ones.
We must plead with the municipality to deal with this and find better solutions. For the consumers and businesses entering into something that looks attractive, please be aware, there is a sting to this whole affair.
-David Mertens, Summerstrand, Port Elizabeth